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Do you guys use Closed End Funds?
Old 09-25-2007, 12:50 AM   #1
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Do you guys use Closed End Funds?

Hi, I was just wondering if you have ever dabbled into the closed end fund world. I was looking at ETFConnect - Home since I was thinking about investing in a muni bond fund, since I live in NY. Some of these things are leveraged out the wazoo and paying out 5%+ yields, in tax free interest.

Do you have a particular holding in any closed end funds? What is your experience? I realize they exhibit premiums and discounts in share price vs NAV, but besides that, what are the pros and cons?

Thanks!
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Old 09-25-2007, 12:58 AM   #2
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For fixed income CEFs the issues are presence or absence of leverage, discount, credit quality of securities held, and expenses including turnover. I also believe that some managers are likely better than others.

For equity funds, add to these whatever embedded unrealized capital gains that might exist. If there are a lot, I would consider holding in a tax-deferred account.

I should add that I have used these, and will again though at present I don't own any. Also, any of these things get too complicated quickly for dabbling. It will take a little study to get the issues down, and then to find what fund you want.

Ha
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Old 09-25-2007, 02:15 AM   #3
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I have not used CEFs. Although, I have looked into them. Since CEFs often trade at a premium or discount, it adds some additional risk or reward.... I have avoided them.

There are so many investment vehicles available today... I have been able to get by without them.

I would probably lean more toward ETFs if I wanted something that I would sell on the exchange.

But, if there was a great closed-end fund (a great manager), I might consider it.
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Old 09-25-2007, 04:43 AM   #4
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I monkey with them occasionally. GIM when it is at a discount to par is an excellent way to foreign bond exposure. Like PPT, too.
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Old 09-25-2007, 08:44 AM   #5
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Definitely use them, you usually can pick them up at discounts to par if you are patient. I have bought a few, like AOD when it was issued, and so far, so good..........
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Old 09-25-2007, 08:47 AM   #6
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For our company's pension-like plan that I manage, I hold a huge slug of UTF - a utilities CEF. Big discount to par. Very significant exposure to the utilities sector was mandated by the powers that be (don't ask ), so I chose UTF since it was selling at a major discount.

I don't necessarily care for the high expense ratio (versus VPU, for example) or their use of leverage. UTF is also currently paying out more in divvies than they are earning. It is relatively thinly traded, and in the large quantities that I purchased for the pension-like plan, I moved the market when I bought, so lost a little bit on the trade that smaller players wouldn't have lost (the "market impact" cost is real).

ADX is another CEF that is trading at a significant discount for what looks like a fund holding mostly blue chip companies at a low expense ratio (0.46%).
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Old 10-11-2009, 06:27 AM   #7
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Quote:
Originally Posted by FinanceDude View Post
Definitely use them, you usually can pick them up at discounts to par if you are patient. I have bought a few, like AOD when it was issued, and so far, so good..........

Do you still have AOD and do you like it at its current price (under $9, yielding ~ 17.5%)
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Old 10-12-2009, 02:49 AM   #8
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I typically buy them when they are selling for large discounts at least 10% to NAV and preferably >15% this is typically at the end of the year especially during down years, and sell them when the discounts have narrowed.

Discounts have narrowed considerably at least for equity CEF, so I'd be cautious investing in them now.
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Old 10-13-2009, 12:22 PM   #9
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I currently have some money in AWF, DSU & HTD. I want to find a good Municipal CEF. If anyone has any information, I will appreciate it.
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