BlackRock is making changes to some of its highest-yielding funds. Today were going to zero in on a 13%-yielder thats at the center of the action: the tech-focused BlackRock Innovation and Growth Term Trust (BIGZ).
Yes, the fund focused on tech. So the pullback in American AI stocks on news that Chinese AI chatbot DeepSeek, which was launched earlier this month, can rival the latest version of Open AIs ChatGPT, factors in here, too.
BIGZ is a closed-end fund (CEF) with nearly $2 billion in assets under managementenormous for a CEF (The BIG is right in the ticker, after all).
So any changes to BIGZ are worth watching, especially when, as is the case now, those changes (including a big share-buyback program) are partly a response to activist action, both around the funds sponsor, BlackRock, and the CEF industry as a whole.
Lets dive into exactly whats going on here.
The best place to start, actually, is with BlackRocks other two big tech CEFs, the 8.2%-yielding BlackRock Science and Technology Trust (BST) and the BlackRock Science and Technology Term Trust (BSTZ), another 13% yielder. Unlike BIGZ, these funds arent changing, for reasons that should be clear in a bit.
(BST and BSTZ are both buy recommendations of my CEF Insider advisory.)
These funds portfolios overlap, but theyve recently taken different paths. BSTZ, for its part, has been focusing more on private tech firms, as well as fast-growing public companies. NVIDIA (NVDA), its largest holding, and Astera Labs (ALAB), are examples of the latter. Both are at the heart of AIs continued growth.
Even with the DeepSeek news on Monday, and the pressure it put on American AI stocks, these two have still posted strong gains, up 31% and 34%, respectively, since Asteras IPO in March 2024.
However, as the developments around DeepSeek showed us, theres still a lot of uncertainty around AI. Thats why BSTZs sister fund, BST, bolsters its NVIDIA position with mature tech firms like Microsoft (MSFT), Apple (AAPL), Meta Platforms (META) and Amazon.com (AMZN), all top-10 holdings.
As a result, BST has been less volatile in the past year, on the basis of the performance of both its underlying portfolio (a.k.a. its net asset value, or NAV), and its market price (both including dividends).
(Since CEFs have fixed share counts, there is often a difference between the market price and NAV returns, with the market price often discounted).
But BSTZ (in purple below) put up a stronger market pricebased total return as investors got aggressive about tech after the 2022 rout.
BST and BSTZ Combine for Strong Gains, Lower Volatility
This, by the way, is exactly why we hold this duoto get tech exposure and use BSTs large cap focus to temper our volatility.
Thats worked well, with BST and BSTZ delivering us a 24% average return between them in the last year, well above the S&P 500s 16% return, with a big slice of that in cash, thanks to their 10.5% average yield.
So where does BIGZ fit in here? It has some investments in private firms, similar to BSTZ and, to a lesser extent, BST. But the key difference is that BIGZ has major holdings a little outside tech, with military contractor Axon Enterprise (AXON), data-center servicer Vertiv Holdings (VRT) and plumbing/HVAC specialist Comfort Systems USA (FIX) being its biggest positions.
As you can see, the focus here is on small firms that are growing fast. This should mean fast returns for BIGZbut thats not what weve seen.
Check its performance based on the latest numbers for its total NAV return (or, again, the return of its underlying portfolio, including dividends).
BIGZs Portfolio Gets Dusted
As you can see, it was much weaker than those of the other two CEFs. This lag was unacceptable, as activists reminded BlackRock, which responded by shaking up BIGZ in several ways.
For one, BIGZ will get a new management team and a new mandate tightening its focus on tech. You can read more about those changes here.
BlackRock is also bringing in a buyback program under which shareholders can tender shares of BIGZ for 99.5% of the funds NAV per share. The company is offering this for half of the total number of shares outstanding, and the stop and start dates havent been announced yet. Thats a massive program that should help support BIGZs market price.
BIGZs Big Opportunity
With a 9.1% discount to NAV, investors can buy BIGZ at 90.9 cents on the dollar and sell at 99.5 cents on the dollar, a 9.5% gain separate from BIGZs market performance.
The risk here is that, if BIGZs NAV drops before an investor can redeem their shares, they might end up redeeming them for less. But in that case, they could simply ignore the redemption and keep collecting BIGZs 13% dividendprovided the funds new management keeps earning enough profits to maintain that payout.
My Prediction: DeepSeek Will Put AIand These 9.5% Dividendsin Hyperdrive
One thing we do NOT want to do now is let something like a cheaper AI chatbot from China scare us out of the field entirely.
If anything, this development will accelerate the growth of AIand more importantly, its integration into the apps and other tools we use every day.
Because if theres one thing you can bet on its this: Chinas move will prompt American tech giants to double down and produce even cheaper, better AIand much more quickly than would otherwise be the case.
And the 4 AI-focused funds (current yield: 9.5%) Im pounding the table on now are here for it.
These 4 funds hold the companies critical to AIs development. Plus, they go one step further, tapping into stocks beyond tech that stand to reap the biggest gains as AI cuts their costs and boosts their sales.
Best of all, these four CEFs trade at big (and in my view temporary!) discounts. So when you add in the effect of Mondays selloff, were getting a rare DOUBLE discount hereand a huge 9.5% dividend, too!
Now is the time to strike. Click here to learn more about these 4 AI-powered funds (and their rich 9.5% average payout) and get a free Special Report naming all of them.