Cohen & Steers Closed-End Fund: A Little Overboard On Diversification

Cohen & Steers has disclosed the year-end holdings of the Cohen & Steers Closed End Opportunity Fund (FOF). This is a fund that owns other closed end funds. Diversification is good, but I think they may have gone a little overboard. The $504 million fund owns 64 other closed end funds! The expense ratio of FOF is 0.95%, and the average expense ratio of the underlying closed end funds is about 1.20%, so the combined expense ratio for FOF is a little over 2%.

FOF is invested primarily in equity based funds, but they look for high dividends or distributions or special situations like covered call writing. Here are the top ten holdings with the latest discount or premium and current annual distribution rate:

(NFJ) -1.09% 8.24%
(CSQ) -5.24% 7.61%
(BGR) -10.24% 5.59%
(HTD) -13.23% 5.78%
(ETB) +1.04% 8.80%
(GDV) -11.04% 5.64%
(IGR) -4.92% 5.95%
(SCD) -12.98% 6.33%
(SRO) -15.02% 2.02%
(HIX) -7.23% 7.88%

The FOF portfolio looks pretty good, but I do not own it because it sells at a 3% premium to NAV, and the combined expense ratio is quite high.

Full Disclosure: I do own three of the above funds (HTD, GDV and SCD) in my portfolio.

FOF 1-yr chart: