Are closed-ended funds a good idea? | Investing | Discussion forum

Please consider registering
guest

sp_LogInOut Log In sp_Registration Register

Register | Lost password?
Advanced Search

— Forum Scope —




— Match —





— Forum Options —





Minimum search word length is 3 characters - maximum search word length is 84 characters

sp_Feed Topic RSS sp_TopicIcon
Are closed-ended funds a good idea?
June 18, 2021
9:41 pm
saren
Member
Members
Forum Posts: 27
Member Since:
August 17, 2019
sp_UserOfflineSmall Offline

Hey, I'm looking for a high rate of return. Found these 3 (among others). CLM GLQ GOF. If you have any direct experience with these funds (or similar) please let me know? I want to learn as much as I can about them. Thanks

June 19, 2021
4:41 am
savemoresaveoften
Member
Members
Forum Posts: 683
Member Since:
March 30, 2017
sp_UserOfflineSmall Offline

A few pointers:
High real rate of return = high risk, no get around, no magic
Closed end funds usually are more restricted and investor has to be mindful of withdrawal restrictions etc
Any fund manager can only generate a real high rate of return consistently if he/she is an investment super star. In other words, mkt average return (dividend and/or interest) is X while the manager manage to return Y, with Y >> X.
Most of these fund do is they return your own capital as part of your "annual return" to jack up the rates. Look at the tax breakdown on the return for these funds and see how much is return of capital vs "real return"
You will notice if stock price does not move much over time, it is one of those.
Otherwise you would imagine a 10% return fund when mkt is at 3%, the stock price will go thru the roof if it is real.

June 19, 2021
8:54 am
Norman1
Member
Members
Forum Posts: 4270
Member Since:
April 6, 2013
sp_UserOfflineSmall Offline

Many of them don't allow withdrawals. Only way to get out of them is to sell.

If one wants to sell and others do as well, then one will not get net asset value for them.

Don't believe the garbage about buying $1 of assets for $0.80 when a closed-ended fund trades at a 20% discount. There's no sure way to realize that extra 20%. Investors usually get non-voting shares. So, they cannot force a windup of the fund and receive the net asset value.

When one sells, the fund could still be trading at a 20% discount to net asset value or even more.

June 19, 2021
9:47 am
saren
Member
Members
Forum Posts: 27
Member Since:
August 17, 2019
sp_UserOfflineSmall Offline

Ok thank you

August 31, 2021
11:15 pm
picassocat
Québec
Member
Members
Forum Posts: 262
Member Since:
December 29, 2018
sp_UserOfflineSmall Offline

I've dealt with many closed ended funds and I still have a few in my portfolio (DFS, ENS). Be watchful, some stop paying dividends when there is a crash, so choose wisely.

September 1, 2021
4:28 am
mordko
Member
Members
Forum Posts: 50
Member Since:
April 27, 2017
sp_UserOfflineSmall Offline

Close end funds offer extra risks and extra opportunities. In general, markets are efficient, the prices are right and its very hard to find money lying on the road. Does happen though. Occasionally closed end funds offer this opportunity due to price mismatches.

A couple of years ago a closed fund of municipal US bonds (NBD) was trading at 20% below NAV. No new “build America” bonds were to be issued so the fund announced plans to liquidate. That’s when I bought it. Liquidation means you are paid NAV. Sure enough, the price started to approach and soon matched NAV. That’s when I sold it. Money really was lying on the road waiting to be picked.

Please write your comments in the forum.