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  • The Closed-End Fund Discount Quandary [View article]
    I like Nuveen's etfconnect.com as well. I've found that CEFs often charge unusually high fees - often 2-8x greater than a comparable ETF. Meanwhile, the payout from leverage and other sources is often 2-3x higher than a comparable ETF. Originally, I'd thought that a 10% yield with 3% fees = 7% total gain (assuming a completely flat market) v. ETFs, where several offered a 5% yield while charging .5% fees or less = 4.5% total gain (also assuming completely flat market).

    I've since rejected that original theory after a bit more research (and dumped the CEFs I'd purchased). Long-term, 10-20 years, most CEFs have gradually declined, which suggests they were paying out principal along with leverage. If so, then a "discount" would merely reflect degrading principal over time (once you apply leverage, the NAV remains the same on paper, but in practice, is quite distinct). If so, then over time, high yield CEF's serves merely to "launder" principal into yield (while enriching a manager) - why would I want to do that?
    Mar 17 04:05 am |Rating: +1 0 |Link to Comment
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