Closed-end fundamentals: 5 answers to key questions paid NuveenInv
In a 2018 Forbes Insights survey of more than 1,000 investors, the majority reported that their advisors never discussed CEFs and less than 9% reported owning one. This may be a missed opportunity for both investors and advisors, since most investors also said it’s valuable when advisors suggest investments they haven’t considered.
Unlike open-end mutual funds, CEFs can employ leverage—and 72% of them do. And a more stable asset base provides CEF managers with greater freedom to invest in less liquid, potentially higher-yielding assets. Like open-end mutual funds, CEFs carry risks associated with their underlying investments. In addition, CEFs can use leverage, which increases their volatility. Both gains and losses are amplified. leverage has historically delivered incremental income that has more than compensated for the associated cost and added volatility. Thus, CEFs tend to reward longer-term investors.
But more than half of CEF holders are under age 60, according to a Forbes Insights survey of financial advisors. Because CEFs offer portfolios in many of the same asset classes as open-end funds, they may be a smart choice for an investor who wants to boost income while maintaining portfolio diversification.
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