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Are You Sitting On A CEF Time Bomb?

Maks F. S. profile picture
Maks F. S.
5.26K Followers

Summary

  • A "heart to heart" discussion about closed-end funds and why many are ticking time bombs.
  • A look at the three major, current negative factors for CEF investing and why they are not being discussed.
  • A discussion of the factors that need to be looked at as part of the due diligence process.

Note: Income Idea subscribers received an early look at this CEF School article on 11/1.

CEFs (closed-end funds) are AWESOME! Seriously... they are and CEF investors will typically agree and are likely nodding their heads along!

Closed-end funds let you invest in compelling asset classes while generally drawing an above-market distribution while the actively managed fund can make investments with conviction. What makes this even better is that in the vast majority of the cases, you buy those assets at sometimes substantial discounts.

However... like an aggressive dog, it can sometimes bite, particularly in times when you are having too much fun!

As much as I LOVE CEFs, more and more of the closed-end funds which we look at in our articles or I am requested to look at by a subscriber ends up having a lot of "eh" or "leave it" ratings with a bunch of... "watch out for..." statements.

While in our latest CEF school article we discussed why interest rates mattered for closed-end funds, I wanted to write this article for both subscribers and my regular Seeking Alpha community to sound the bell and make it clear...

Many Of The Closed-End Funds Are Ticking Time Bombs!

In two of my recent closed-end fund articles discussing the Reaves Utility & Infrastructure Fund (NYSE:UTG) and the PIMCO Dynamic Income & Mortgage Fund (PCI), it became abundantly clear that the vast majority of the retail public either does not fully understand where or how the distribution is generated or may understand it but does not care, putting their faith into management and past performance.

In order to understand why CEFs may be time bombs, it is important to understand

This article was written by

Maks F. S. profile picture
5.26K Followers
Intrepid Leader at an RIA.  My firm and I simplify the lives of busy clients by providing ongoing financial planning and asset management. this is done by providing our clients customized, ongoing comprehensive financial planning, and customized investment advisory services tailored to the clients' needs. As a fiduciary, we have a legal obligation to put the needs and interests of our clients above our own. Specialties: fee based comprehensive financial planning, retirement planning, life insurance and protection planning.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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