The interview gives an inkling of how complex investing in CEFs can be when he says they look at 20-30 different things to pick funds.
Included in there toward the end were several portfolios with different objectives, including a U.S. Equities Portfolio. A couple of observations:
The portfolio had 14 different funds. I was surprised that in looking at them on ETFconnect, there is very little overlap of holdings within the funds. There is some, but not a lot. This is not easy to do.
Consistent with the article, almost all of the funds were trading at big discounts to NAV. Some of the funds have almost no volume. Of the 12 holdings that Yahoo could chart (there were two it could not), nine lagged the S&P 500, two beat and one had the same return.
I concede that in most instances the S&P 500 is not the best benchmark for this study, as some of the funds are smaller in cap size. This lag of the funds means one of two things: either this portfolio lagged badly (not the bet I would make), or they do a lot of trading and get good returns (this would be the way I would lean, but I did not see any returns posted, apologies if I missed). For the month of April, this portfolio had eight trades -- which seems active to me. It would be very difficult for most do-it-yourselfers to replicate this on their own.
This is his approach, and I am sure it is successful for him, but either you pay them to manage your money, try to do re-create something similar yourself -- or use closed end funds in a completely different manner. It that last one that I have gravitated to.
For certain segments of the market I think closed end funds work very well, but I am not sure plain, domestic equity exposure is one of those segments. I have one call-writing CEF as an across the board holding. Some clients own one of the India CEFs. A couple of clients own a dividend capture fund, and that is it on the equity side of the ledger. I do a little more with fixed income CEFs with a convertible bond fund, a foreign bond fund, and in some instances a generic bond fund.
Herzfeld has forgotten more about CEFs than I'll ever know -- so he can use all-CEF portfolios. Most us should not, including me.