Closed-end Leveraged Bond/Convertible Fund questions

[audreyh1]

A relative recently bought some Calamos Convertible and High Income Fund CHY, a closed-end fund, for the outsized yield.

I posted the whole series of questions I have about it on the Morningstar Closed-End Fund forum, but if any of you have insights into this type of investment I would appreciate your input as well.

Here is my M* post with questions: CEF questions on CHY in particular

Thanks much!

Audrey

 

[nwsteve]

Audrey
Here is a link which discussed closed end funds on this board. http://www.early-retirement.org/forums/f28/closed-end-funds-advice-32011.html
I used the Closed End Fund Assn website for reseaching this specie of investment--generally easier to navigate and links to issueing fund. CEFA - Closed-End Fund Association.
The discount lookes a bit thin to me as you are buying it essentially at par. There are a lot of CE funds with much higher discounts and lower expense ratios. I recently put some IRA money into an Evergreen Multi Sector CE and the discount at purchase was 14.5 (now 11.5%). CEFA site will give you latest discount rates and expenses by clicking through to the specific fund. You will pretty much have to go to the CE Fund website and get the prospectus and report to get some data.
I have found most of the CE funds have higher expenses than what you would see from the mainstream fund houses.
I don't think I have covered all your questions but I hope it helps.
Nwsteve

 

[clifp]

Hi Audrey.

The response you got over at M* is excellent. Hard for me to improve on. I generally monitor ETFconnect and pay attention to discounts. Because of the the high expense ratios associated with most close-end funds I seldom buy them with less than 10% discount to NAV and when the get closer to 15% (which they often do near the end of the year due to tax selling).

 

[audreyh1]

Yeah, thanks clifp - I just read the terrific Morningstar response. That answered a lot of questions and it looks like some of my concerns are justified.

I noticed a few places recommending at least 10% discount to NAV for CEFs, but I'm still trying to absorb all the nuances and implications of the CEF world. I've never tried to venture into them myself - to exotic for me!

Thanks for the links nwsteve

Audrey