Assessing Distribution Sustainability in Aberdeen Investments U.S. Closed-End Funds: Return of Capital and Performance Alignment

The sustainability of distributions in closed-end funds (CEFs) hinges on two critical factors: the composition of distributions and the alignment of fund performance with investor expectations. For Aberdeen Investments U.S. CEFs, the abrdn Global Infrastructure Income Fund (ASGI) and the abrdn Healthcare Opportunities Fund (THQ) offer contrasting case studies. By analyzing their return of capital (ROC) breakdowns and historical performance, we can evaluate whether their distribution strategies are aligned with long-term value creation or risk eroding shareholder capital.

ASGI: A Model of Income-Driven Distributions

ASGI’s August 2025 distribution of $0.2100 per share was sourced from 14% net investment income, 3% short-term gains, 36% long-term gains, and 47% return of capital [3][4]. While ROC constitutes nearly half of the payout, the fund’s reliance on income and gains—particularly long-term gains—suggests a more sustainable approach compared to funds that depend heavily on ROC. Over the past five years, ASGI has delivered an average annual total return of 10.13%, outperforming the broader market and demonstrating resilience in capital preservation [4]. This performance, coupled with a 12.21% dividend yield, indicates that ASGI’s distributions are supported by a diversified revenue stream rather than pure principal returns [2].

However, the fund’s ROC component remains a cautionary note. Return of capital reduces the fund’s asset base over time, potentially limiting future growth. Investors must weigh this against ASGI’s strong historical returns and its focus on infrastructure—a sector with stable cash flows and long-term demand.

THQ: High ROC and Volatile Performance

In contrast, THQ’s August 2025 distribution of $0.1800 per share was 98% return of capital and 2% short-term gains [3][4]. This extreme reliance on ROC raises concerns about the fund’s ability to sustain distributions without eroding its capital base. THQ’s performance has been equally volatile: while it posted a 15.49% total return in 2024, it also recorded losses of -17.48% in 2022 and -1.60% in 2023 [1]. The fund’s 23.61% leverage further amplifies risk, as debt can magnify losses during downturns [3].

THQ’s 12.80% distribution rate, though attractive on the surface, masks the fact that its average earnings per share as of March 2025 were negative (-$0.0199) [1]. This suggests that the fund is not generating sufficient income to cover its payouts, relying instead on returning investor capital. Such a strategy may be viable in rising markets but could backfire during periods of underperformance or market stress.

Performance Alignment and Investor Implications

The divergence between ASGI and THQ underscores the importance of aligning distribution strategies with fund performance. ASGI’s 10.13% average annual return over five years [4] supports its ability to maintain distributions without excessive ROC, whereas THQ’s 3.92% average return [4] highlights a misalignment between payouts and earnings. For investors, this means that THQ’s high yield may come at the cost of capital erosion, while ASGI’s distributions are more likely to be sustainable.

A would further clarify these dynamics. Such data could reveal whether ASGI’s income-driven model consistently outperforms THQ’s ROC-heavy approach.

Conclusion

Distribution sustainability in CEFs requires a balance between income generation and capital preservation. ASGI’s diversified distribution sources and strong performance position it as a more reliable option for income-focused investors, while THQ’s heavy reliance on ROC and volatile returns pose significant risks. As market conditions evolve, investors must scrutinize not just the size of distributions but also their composition and the fund’s ability to generate earnings.

**Source:[1] abrdn Healthcare Opportunities Fund:THQ, [https://www.cefconnect.com/fund/THQ][2] Abrdn Global Infrastructure Income Fund (ASGI) Dividend, [https://stockanalysis.com/stocks/asgi/dividend/][3] Aberdeen Investments U.S. Closed-End Funds Announce Distribution, [https://www.gurufocus.com/news/3087983/aberdeen-investments-us-closedend-funds-announce-distribution-payment-details-asgi-stock-news][4] ASGI - abrdn Global Infrastructure Income Fund, [https://www.dividend.com/stocks/financials/asset-management/investment-management/asgi-abrdn-global-infrastructure-income-fund/]