Yield of 8% or higher, inflation protection discounted by 11%
In the choppy financial waters of 2025, economic experts are predicting a rise in inflation, leading many to worry their hard-earned cash won't hold its value. To ride this wave and secure some sweet returns, we've thrown our hat in the ring with Western Asset Infl-Linked Opps & Inc Fd, or WIW for short. It's a closed-end fund, also known as a "CEF."
WIW 101:
WIW invests at least 80% of its assets in inflation-linked securities, with the flexibility to dabble in other fixed-income options like high-yield, emerging markets, structured products, commodities, and foreign currencies. Its primary goal is to generate income, with a secondary objective of capital appreciation. It debuted on February 27, 2004, and as of writing, it manages $592M, with a whopping 144 holdings and 229K average daily volume.
The fund carries a not-so-small price tag in terms of management fees. With approximately 31% leverage, WIW's expense ratio clocks in at a hefty 3.57%, earning it an extra 2.87% in interest expenses.
Portfolio Snapshot:
The WIW portfolio is predominantly investment-grade, with a hefty 85% in AA securities, 2.11% in AAA, 2.11% in A, and 4.92% in BBB. The United States takes the cake as the largest exposure, capping out at 129.54%, followed by Brazil at a tiny 2.98% and Mexico at 1.94%. There are less than 1% investments in several other nations.
3-5 year maturities make up the largest exposure at 37.26%, but there are many other maturities available, such as 1-3 years at 21.89% and 7-10 years at 15.51%. The portfolio's duration is a hefty 7.54 years.
As of March 31, 2025, the portfolio is divided into five main types of securities, with the majority being Inflation-Linked at 82.59%. WIW also dips its toe into Emerging Market debt at 4.8%, Investment Grade Credit at 4.66%, and splashes around with ~3% each in Non-Agency Mortgage Backed Securities and Commercial Mortgage Backed Securities. The rest of the portfolio is scattered with various other types of securities, holding less than 1% exposure.
The U.S. inflation-linked securities range in maturities from 2025 to 2045, but the 2029 and 01/26 securities take the cake, with 20.48% and 15.55% holdings, respectively.
Dividend Details:
At its price of $8.55 on June 13, 2025, WIW dishes out a tasty 8.77% yield. The fund pays dividends monthly and goes ex-dividend next on June 23, with a payment date of June 30.
WIW's base dividend per share has grown by an average of 13.76% over the past five years, with total annual dividends growing by an average of 38.75%. However, this growth has been skewed by a massive 262.85% jump in 2021 thanks to the distribution of $.95.
Between 2023 and 2024, WIW recorded a decrease in Net Investment Income (NII) from $21.8M to $17.3M while simultaneously improving Net Realized Losses from $-6.33M to $2.4M. Net Unrealized Appreciation swung from a loss of $14.42M in 2023 to a gain of $20.71M in 2024.
WIW saw an 8% decline in assets in 2023 but a smaller 1.5% decline in 2024, wrapping up the year at $606.9M. The fiscal year ends on November 30th.
Tax Time:
WIW's management estimates that NII accounted for 100% of the monthly distributions for December 2024 to February 2025. For fiscal year 2024, NII was also estimated to comprise 100% of WIW's distributions.
The Scorecard:
As of March 31, 2025, WIW handily beat the Bloomberg US Government Inflation-Linked 1-10 year index on a price basis over the past year, scoring a respectable 11% compared to the index's 6%. It also outperformed the index for the past 5- and 10-year periods but underperformed it slightly since inception.
So far in 2025, WIW is up 3.45% in price, compared to the S&P 500's 2.61% growth.
Risks & Valuations:
In the financial world, fixed income securities carry interest rate, credit, inflation, and reinvestment risks, potentially causing you to lose your initial investment. Low-rated, high-yield bonds involve greater price volatility, illiquidity, and the possibility of default.
Liquidity risk exists when securities become challenging to sell, or un-sellable, at their valued prices.
International investments come with their own set of special risks, like currency fluctuations and social, economic, and political uncertainties, which can increase volatility – especially in emerging markets.
Currency management strategies can lead to the fund's losses if currencies don't perform as anticipated.
Discount Special:
Buying CEFs at a deeper discount than their historical average can be a smart strategy due to mean reversion, which occurs when a CEF's net asset value (NAV) closes in on its market price.
As of June 12, 2025, WIW was selling at a 11.46% discount to NAV/share.
Final Thoughts:
As of June 13, 2025, WIW was hovering at around 4% above its 52-week low. Though its 11.46% discount isn't quite as deep as its 12.26% 5-year average discount, it's close enough to pique our interest given its ability to hedge inflation. We give WIW a solid Buy rating.
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We recently cashed in a position in June 2025 with a 36%-plus total return from inception. So keep your eyes peeled for more opportunities to pile up that dough!
The government may find investing in WIW, a closed-end fund specializing in inflation-linked securities, beneficial, given its objective of generating income and capital appreciation. Individuals seeking personal-finance strategies to hedge against inflation might also consider WIW as it offers a high yield of 8.77% as of June 13, 2025, and provides an opportunity to potentially profit from inflation-linked securities.