Originally Posted by nwsteve
Question for you long term closed end fund experts--do you routinely sell your closed end fund when it goes to a premium?
I have several income based CEFs and seen 11-15% discounts move to near or slight premium positions in the last week or so. The positions are all in tax sheltered positions so no tax issues. All the funds generate attactive yields on purchase price north of 7% (obviously lower now). So is playing the discount to premium move the right reason to close positions? Quandry is where I would put the dollars to get the yield currently locked in.
I see no reason to hold a CEF at premium. The expenses are generally much higher than an index fund. As for what do with the money that certainly is a quandary.
One potential thing you can do is look at the 10 ten holding of the CEF and buy them. For instance I looked at both several CEF equity income, and bond funds from Pimco, Nueveen, Nicholas. Typically the top holding represents 25% of the assets of a CEF. So for <$100 in commission you can replicate a good chunk of the CEF lock in the premium you received, and avoid the 1-2% ER charge.