This may give closed-end fund managers more flexibility to invest in less liquid assets, such as private companies, derivatives, or certain debt instruments. Closed-end funds sell their shares in a public offering. After that, their shares trade on national securities exchanges at market prices. The market price may be greater or less than the market value of the fund's underlying investments. Closed-end funds may follow a managed distribution policy. A managed distribution policy means that the funds pay distributions to their shareholders on a set schedule. This helps provide a predictable, but not guaranteed, cash flow to shareholders on a monthly or quarterly basis. What are some potential risks and benefits of investing in closed-end funds? As with any investment, you could lose money investing in a closed-end fund. Access to Less Liquid Investments. Because closed-end funds have more flexibility with their investment portfolios, they may hold a greater percentage of less liquid investments than mutual funds and ETFs.
If an investor purchases closed-end fund shares on a securities market, the only transaction fees the investor pays are typical brokerage commissions. What this means for you: These fees reduce the value of your investment. If you buy closed-end fund shares in the initial offering, you will likely pay higher fees than if you were to buy the shares of the same fund later on a securities exchange. In addition, typically the price of closed-end fund shares immediately decreases after an initial offering, and the shares sell at a discount. If you buy or sell closed-end fund shares on a securities exchange, you will pay a typical brokerage commission, but not any sales loads or purchase or redemption fees. Regardless of whether you purchase your shares in an initial offering or on a securities exchange, you will pay for the fund's operating expenses. These expenses – management fees, distribution fees and shareholder services fees – are paid indirectly by shareholders out of fund assets. For a list and explanation of fees associated with a closed-end fund investment, you should review the fee table, which is available in the fund's prospectus, the annual and semi-annual shareholder reports or other relevant fund documents, or ask your financial professional.
Important information: This site does not list all of the risks associated with each fund. Investors should contact a fund's sponsor for fund-specific risk information and/or contact a financial advisor before investing. Closed-end fund historical distribution sources have included net investment income, realized gains, and return of capital. For more detailed information on the distributions of a specific Fund, please visit the Fund sponsor's website. makes data for the universe of closed-end funds available as a courtesy to its users. data are supplied by the service provider, Morningstar. For certain data points, Morningstar uses publicly-available sources such as the Fund's annual or semi-annual report, public announcements, press releases or regulatory filings; in some cases, it may rely on direct feeds from the Fund or Fund sponsor. Although the methodology behind the data shown for the products on this site may generally be the same as the Fund sponsor's, the data itself may differ from that shown on the Fund website due to the frequency of the updates (daily vs. monthly vs. quarterly vs. annually).
Users should consider these factors when evaluating the information shown on this site and review the Fund's or Fund sponsor's website for the Fund's most recent and complete information including performance, objectives, risks, charges, expenses and prospectus, before making any investment decision. This material is not intended to be relied upon as investment advice or recommendations, does not constitute a solicitation to buy or sell securities and is not provided in a fiduciary capacity. The information provided does not take into account the specific objective or circumstances of any particular investor, or suggest any specific course of action and should not be considered specific legal, investment or tax advice. The content of this site, including but not limited to the text and images herein and their arrangement, are Copyright ©2021 by Nuveen, LLC All rights reserved. Nuveen Disclaimer Information.
Municipal bond funds have significant representation among the funds trading at the largest discounts, though other classes of funds, including energy and MLP funds are among the most heavily discounted. Any Bargains? I compiled a list of funds trading at the biggest discounts and with a z-score of -2. 5 or lower. A z-score is the difference between the fund's current and average discounts relative to its standard deviation. Many analysts consider a z-score of -2. 5 or less as an indication of cheapness. Four of the top-10 on our list of biggest current discounts and Z-Scores of -2 or lower are muni bond funds. All of them have leverage ratios above 35%. That means if interest rates continue to move higher, bond funds using borrowed money could suffer. But if rates stabilize or decline, that could be a boon for these funds. Also, a word of caution about the Boulder fund – I've seen it among funds with the cheapest discounts for many years. The discount could narrow from here, but I wouldn't count on it to close.
Paying a Premium or Discount. The market price for closed-end fund shares may be greater or less than the shares' net asset value (NAV). Shares that sell at a price higher than the NAV are said to be sold at a premium, and shares that sell at a price lower than the NAV are said to be sold at a discount. Closed-end fund shares may sometimes trade at a discount, but may sometimes sell at a premium. What this means for you: Trading at market price means you may pay more or less for closed-end fund shares than the current value of the fund's underlying investments. This pricing creates an additional layer of risk and opportunity when owning closed-end fund shares. If you purchase shares at a premium, you are paying more than the current value of the underlying investments. If you purchase shares at a discount, you are paying less than the current value of the underlying investments, but you may be unable to sell the shares other than at a discount. Receipt of Regular Distributions. Many closed-end funds follow a managed distribution policy.
Overall, investors have a variety of funds in different asset classes from which to choose. But investors should think of this type of investment as a stock investment even if the fund holds bonds. That's because using borrowed money magnifies the overall investment risk. Post Views: 7, 586 2018/10/17
It's debatable whether the recent stock market slide created some bargains, but there's another corner of financial markets where inefficiencies prevail more regularly – the closed-end fund universe. What's a Closed-End Fund? Unlike mutual funds, which continually issue and redeem shares according to investor demand, closed-end funds take in money and issue a finite number of shares once, in an initial public offering. After the IPO, the fund closes to new money; there are no outflows and no inflows, making the arrangement convenient for holding illiquid assets. Investors must then trade shares on an open exchange like stocks to each other rather than purchasing and redeeming with the fund itself. For that reason, the share price of a closed-end fund can rise above or fall below the net asset value of the fund's holdings. When a fund's share price drops below, or trades at a discount to, its net asset value ( NAV), it can be a bargain as long as investors understand there's no guarantee that the price will match its NAV soon or ever.
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