Latest news with #CEFs
Forbes
a day ago
- Business
- Forbes
Why We're Dodging These 3 Gold CEFs (Even With Gold Soaring)
A lump of gold on a stone floor getty Here's a surprise from a die-hard closed-end fund (CEF) fan like me: Sometimes CEFs aren't your best bet. I'll admit, that's tough for me to say—especially when the average CEF yields a historically high 9.1%. (CEF yields are usually around 8.5%). That high yield partly reflects the fact that many CEFs are trading at steep discounts to their net asset value (NAV). Translation: The fund is trading for less than what its underlying portfolio is worth. That, in turn, has resulted in lower prices among some CEFs, along with higher yields (as yields and prices move in opposite directions). All of this simply means that CEFs are generally out of favor right now, which is an opportunity for us. But not every CEF is ripe for buying. We especially want to avoid the three top performers among CEFs with market caps over $200 million: ASA Gold and Precious Metals (ASA), the Sprott Physical Gold Trust (PHYS) and the Sprott Physical Gold and Silver Trust (CEF). The fact that these funds have booked strong runs this year shouldn't come as a surprise: They're all gold funds, and gold has taken off due to rising economic uncertainty (the usual fuel for the yellow metal). Even so, as you can see, there are some clear differences in performance here, and those are worth unpacking. Gold Funds Ycharts Above we see that the Sprott Physical Gold and Silver Trust—with the somewhat confusing 'CEF' ticker, not to be confused with CEFs in general (in purple)—and PHYS (in blue) have similar returns to the benchmark SPDR Gold Shares (GLD) ETF (in green), at around 25%. Then there's ASA (in orange), which has more than doubled even the best of these three other funds. There is some logic at work here. For starters, PHYS and GLD really should track each other, since they both devote almost 100% of their portfolios to physical gold (both own gold bars that are locked up in vaults), and both have similar expense ratios (0.4% for GLD, 0.41% for PHYS). The lower performance of 'CEF' is also not surprising, given that the fund also holds silver, and the 'poor man's gold' hasn't done as well as its yellow counterpart this year. ASA, however, is the clear outperformer. That's thanks in part to its ownership of several gold-mining stocks. Its largest position, G Mining Ventures Inc., a Canadian firm that explores for precious metals, has nearly doubled year to date. ASA's fast short-term gain is, of course, great, but it's unlikely to last. Here's why. Note that, if we go back to 2010, the year the last of these funds, PHYS, launched, we see that GLD (again in green) outran all three of the CEFs. This shows that CEFs were poor options in the case of gold. Moreover, ASA (again in orange) was actually the worst performer, returning just 53% over 15 years, and being in the red for most of that time. ASA Underperforms Ycharts In terms of key takeaways, there are a few here. First, if you want to hold gold, this is a rare case where an ETF, not a CEF, is the better choice. Second, gold is not a great play for income, given that the highest yielder among these funds is ASA, with a puny 0.2%. Third, gold itself is a poor play for the long term, no matter how you invest in it. To see why, all we need to do is splice the S&P 500's performance (in pink below) into that last chart. Gold Underperforms Ycharts It doesn't get much clearer than that! This, however, is where the good news ends for ETF investors. Because when it comes to investing in stocks (or pretty well any other asset class, for that matter), you're far better off with CEFs. Let's take a look at the Adams Diversified Equity Fund (ADX), a CEF we've held in my CEF Insider service since its earliest days: We bought ADX in July 2017, just a few months after CEF Insider's launch. Here's how the fund—current yield: 9% (and in orange below)—has done since, as compared to the S&P 500 index fund SPDR S&P 500 ETF Trust (SPY), in purple, with dividends reinvested: ADX Outperforms Ycharts This chart says it all: CEFs like ADX can crush the S&P 500 and pay us generously while doing so. Plus they give us access to top-notch management and upside-generating discounts to NAV, too. Those are strengths no index fund can match. Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 10% Dividends.' Disclosure: none
Forbes
27-05-2025
- Business
- Forbes
This 1 Simple Trick Can Make CEF Management Fees Vanish
Wooden Blocks with the text: Fees getty Plenty of investors miss out on the huge yields (often north of 8%) that closed-end funds (CEFs) offer. There's one simple reason why: They get way too hung up on management fees. We're going to look at a few reasons why that is today—and one easy way you can make those fees disappear entirely. But first, just how high are the fees we're talking about? Well, the average fee for all CEFs tracked by my CEF Insider service is 2.95% of assets. In contrast, the largest ETF on the planet, the SPDR S&P 500 ETF Trust (SPY), has a fee of just 0.09%. So, to be sure, we are talking about a big gap here. But although CEFs' fees are much higher, there are many reasons why we shouldn't put too much weight on them when making buying decisions. Let's talk about those now. SPY holds every stock in the S&P 500—in other words, the 500 large-cap companies that represent the biggest public firms in America. And while these stocks do well in good times, they can have rough runs, like we saw in April, for example. That's why we want to make sure we're investing in assets beyond stocks, like corporate bonds. CEFs let us do that, and they give us access to smart human managers (not to mention high dividends), too. An actual person at the helm is vital in a lot of these asset classes, and in particular corporate bonds, because deep connections are key to getting access to the best new issues. We all know deep down that diversification works. But using CEFs to do it really can take things to another level, thanks in part to their high dividends. Look at the performance of the PGIM Global High Yield Fund (GHY), in purple below, since the start of 2025 to the time of this writing. GHY is a CEF Insider holding that yields an outsized 9.8%. GHY Total Returns Ycharts As you can see, GHY outran SPY (in orange) while diversifying its shareholders beyond stocks and the US, too. In addition, the bond CEF barely fell below breakeven in April, while stocks were down 15%. And bear in mind, as well, that these numbers are net of fees. Speaking of which, GHY's fees are far higher than those of SPY (1.5% of assets compared to 0.09%) All that said, some CEFs do focus on S&P 500 companies, and still have higher fees, which brings me to my second point… GHY, as mentioned, has total expenses of 1.5%, better than the CEF average but still quite high. Compare that to the Nuveen S&P 500 Dynamic Overwrite Fund (SPXX), an S&P 500–focused CEF whose fees are much less, at 0.97%. But wait, if SPXX is focused on US large caps, why are its fees around 10 times those of SPY? It's largely because SPXX also sells call options on its holdings—or rights for investors to buy them at a fixed date and price in the future. The fund gets paid for these rights (and uses those fees to help fund its 7.7% dividend). There's some cost and work attached to that strategy, hence the higher fees. But it's a small price to pay to get a dividend that's nearly six times that of SPY. Currently, all CEFs covered by CEF Insider have an average yield of 9.1%, while SPY, as mentioned, yields 1.3%. In other words, a million dollars spread across all CEFs would get you over $90,000 in annual income, or $7,572 a month, versus less than $13,000, or about $1,075 monthly, from SPY. Income Potential CEF Insider This is why many investors use CEFs to fund an early, or partial, retirement; if it takes $682,286 in savings to replace the average paycheck in America (as measured by the Bureau of Labor Statistics' median weekly earnings survey) with CEFs but a staggering $4.8 million saved with SPY, you can see why CEFs could attract more attention—and thus, CEF issuers can charge higher fees. Now, here's the kicker: CEFs have an unusual structure that means they often trade for less than their assets are actually worth. Let's say you have a CEF that has $100,000 spread across shares of NVIDIA (NVDA), Apple (AAPL) and (AMZN), among others, and the CEF has 10,000 shares in total. Each share is worth $10. Easy enough. But CEFs are, as the name says, closed. That means CEF issuers can't issue new shares to new investors, so all of the shares trade on the public market, like stocks, and their market prices fluctuate based on investor demand, sometimes diverging from the actual value of the underlying holdings. If that demand is higher than the actual market value of the CEF, it'll trade at a premium to its portfolio's net asset value, or NAV; if lower, it'll trade at a discount. On average, CEFs trade at a 6% discount, according to CEF Insider data. So if your CEF trades at a discount wider than its annual management fee, the discount can effectively offset the cost of that fee. And bear in mind that some CEFs are steeply discounted, with discounts of 10% or more. It's worth pointing out that the fees are taken out of the CEF's portfolio by managers automatically as a matter of course; investors don't have to mail off a check. Let's wrap with a quick recap, then: CEFs give you access to discounted, high-quality assets, far higher income than most ETFs, and they give you a high-income, low-cost way to diversify, too. Plus, the best CEFs outperform their benchmarks—including the S&P 500. This is why CEFs are a passive income weapon that many wealthy investors are happy to keep in their arsenal. Michael Foster is the Lead Research Analyst for Contrarian Outlook. For more great income ideas, click here for our latest report 'Indestructible Income: 5 Bargain Funds with Steady 8.6% Dividends.' Disclosure: none
Associated Press
15-05-2025
- Business
- Associated Press
ICI Applauds Reintroduction of House Bill to Protect Investors and Expand Private Market Access
WASHINGTON, May 15, 2025 /PRNewswire/ -- Today, Investment Company Institute (ICI) President and CEO Eric Pan released the following statement on the reintroduction in the US House of Representatives of legislation to protect closed-end funds (CEFs) and their investors. The Increasing Investor Opportunities Act, was cosponsored by Reps. Ann Wagner (MO-02) and Gregory Meeks (NY-05). 'This bipartisan Increasing Investor Opportunities Act would allow CEFs to invest their assets more freely in securities issued by private funds, increasing opportunities for retail investors to access private markets. The bill also would protect retail investors, including many seniors, from harmful activists that misuse closed-end funds to extract quick profits for themselves. ICI applauds Representatives Wagner and Meeks for continuing to advocate for American investors, and we look forward to seeing the legislation pass both the House and the Senate for the President's signature.' Background: The Increasing Investor Opportunities Act would allow a CEF to invest more assets in private market securities, expanding access for retail investors to these growing markets. It also would restrict the proportion of CEF shares that activist investors and their affiliates could acquire to no more than 10 percent, closing the loophole that activists exploit at the expense of CEFs' long-term shareholders. This restriction would prevent predatory activist investors from extracting money from CEFs by taking over the funds to force them into liquidity events or to radically change their investment strategies. Contact: [email protected] View original content to download multimedia: SOURCE Investment Company Institute
Forbes
11-05-2025
- Business
- Forbes
How To Own Preferred Stock And Collect 7%+ Each Year
Stock market blackboard concept getty While vanilla income investors limit their search to mere 'common' dividends, we contrarians know where the real payout party is at—with preferred stock divvies. Let's talk about three preferred-stock vehicles that pay from 6.9% to 9.4%. All three of these funds dish monthly dividends. And these payouts receive preferential treatment over common-stock dividends, making them safer than the common payouts offered by regular ol' equities. There are four main ways to buy preferreds, and three of them have some serious headaches and drawbacks: CEFs really do outperform their ETF 'benchmark.' Consider this chart of three preferred-stock CEFs versus iShares Preferred and Income Securities ETF (PFF)—all three CEFs boast better returns than the popular PFF: CEFs Outperform Ycharts Of course preferred CEFs aren't perfect. Fees are higher. The use of leverage makes preferreds swing more drastically than ETFs and mutual funds. And when preferreds heat up, CEFs can actually trade at a premium to NAV, which can drag on performance if we buy in at the wrong time. That all said, CEFs are generally the easiest and most effective way for us to buy preferreds. Now let's talk about the three that pay up to 9.4% in monthly divvies. I want to start with a 'hybrid' preferred fund: the John Hancock Premium Dividend Fund (PDT). PDT is technically an allocation fund (stock plus fixed income), split roughly 50/50 between preferred stocks and dividend-yielding common stocks. It's a brilliant idea—combining two great income tastes—that I'm surprised isn't more prevalent in ETF-land, where they can build an index and launch a product overnight. Not that I'd trust an index with this kind of portfolio. John Hancock's team of capital and credit managers have built a pretty tight portfolio of around 125 holdings. Utilities, which are directly stated as part of the fund's strategy, make up the vast majority of common-stock holdings. Financials make up the bulk of the preferred allocation—a surprise to no one familiar with preferred portfolios. Top holdings include high-yielding commons from telecoms AT&T (T) and Verizon (VZ), as well as utilities like Duke Energy (DUK) and BP (BP), but also preferreds like a 7.56% series from Citizens Financial. PDT has historically beaten up on plain-vanilla preferred ETFs like the iShares Preferred and Income Securities ETF (PFF). Of course it has. Not only does it have the benefit of owning some traditional equities, but management also uses a high amount of leverage (34% currently), which lets it make even more out of bull markets. Perhaps more surprising is its performance against pure high-yield common-dividend-stock funds: PDT Total Returns Ycharts The tradeoff, as the chart clearly shows, is volatility. Whereas basic preferred funds are often held to stabilize portfolios, John Hancock's fund's equity holdings and leverage are more geared toward performance than comfort. Fortunately, PDT actually delivers that performance, making it worthy of a look—especially when it trades at a discount to NAV, which it does right now. A 6% sale on PDT's assets might not sound like much, but over the past five years, the CEF has traded at a premium on average. Traditionalists will lean more toward funds such as the Flaherty & Crumrine Dynamic Preferred and Income Fund (DFP), which is as straightforward a preferred CEF as we could ask for. DFP holds about 250 positions, nearly 80% of which are issues from financial-sector firms. This is also a 'global' fund, split about 70 domestic/30 international, so in addition to preferreds from the likes of Citigroup (C) and Morgan Stanley (MS), we also get exposure to preferreds from Lloyds Banking (LYG) and Banco Santander (SAN). Management is more than happy to take some hard swings, too. About half of the portfolio is below-investment-grade, and DFP juices performance and yields further with nearly 40% debt leverage. Flaherty & Crumrine's preferred CEF also offers the best headline pricing of the bunch, at an 8% discount to NAV. And like with PDT, it's also a relative bargain compared to its five-year average discount, which sits around 2%. Most preferred stocks are perpetual in nature. They don't have expiration dates, and thus duration isn't usually necessary when evaluating preferred-stock funds. First Trust Intermediate Duration Preferred & Income Fund (FPF) is different, aiming for a portfolio duration of between three and eight years (and currently sits near five). If we back out the emphasis on duration, FPF looks an awful lot like a regular preferred CEF. Financials command a clear majority of assets. It's not afraid to shy away from international preferreds, which make up more than 40% of assets (Canada alone accounts for 15%). Leverage is high, at 34%. Dividends are high, at nearly 10%. Those dividends come each and every month. Two things about FPF that stand out more than anything? On the upside, First Trust's CEF has pretty great credit quality, with about two-thirds of assets in investment-grade preferreds. Another 15% or so is in BB+, the highest junk tier. Sure, that's why FPF, while better than PFF, hasn't performed as well as the prior two funds. But it's also why FPF boasts the lowest volatility of the three (as measured by beta) over every meaningful time period. On the downside, we're getting a 'phantom' sale on FPF right now. It currently trades at a 5% discount to NAV, but over the past five years, it has actually traded at a 6% discount on average. Brett Owens is Chief Investment Strategist for Contrarian Outlook. For more great income ideas, get your free copy his latest special report: How to Live off Huge Monthly Dividends (up to 8.7%) — Practically Forever. Disclosure: none
Business Wire
30-04-2025
- Business
- Business Wire
Nuveen Credit Strategies Income Fund Announces the Preliminary Results of Rights Offering
NEW YORK--(BUSINESS WIRE)--Nuveen Credit Strategies Income Fund (NYSE: JQC) (the 'Fund') today announced the preliminary results of its transferable rights offering (the 'Offer') which expired at 5:00 p.m., Eastern time, on April 29, 2025 (the 'Expiration Date'). The Offer entitled the rights holders to subscribe for additional common shares of the Fund ('Common Shares'). The Offer is expected to result in the issuance of approximately 12.2 million Common Shares (including notices of guaranteed delivery). The subscription price for the Common Shares to be issued was $5.09 per Common Share, which was equal to 90% of the Fund's net asset value per Common Share at the close of trading on the NYSE on the Expiration Date. As a result, the gross proceeds of the Offer are expected to be approximately $62.1 million. The Common Shares subscribed for are expected to be issued on or about May 5, 2025, after completion and receipt of all shareholder payments. The final subscription price is lower than the original estimated subscription price. Accordingly, any excess payments will be returned to subscribing rights holders as soon as practicable, in accordance with the prospectus supplement filed with the Securities and Exchange Commission on March 20, 2025. This document is not an offer to sell any securities and is not soliciting an offer to buy any securities in any jurisdiction where the offer or sale is not permitted. This document is not an offering, which can only be made by a prospectus. Investors should consider the Fund's investment objective, risks, charges and expenses carefully before investing. The Fund's prospectus supplement and accompanying prospectus contain this and additional information about the Fund and additional information about the Offer, and should be read carefully before investing. To obtain the Fund's prospectus supplement and accompanying prospectus, please contact the Fund's information agent at 833-363-8485. Nuveen is a leading sponsor of closed-end funds (CEFs) with $53 billion in assets under management across 45 CEFs as of 31 December 2024. The funds offer exposure to a broad range of asset classes and are designed for income-focused investors seeking regular distributions. Nuveen has more than 35 years of experience managing CEFs. About Nuveen Nuveen, the investment manager of TIAA, offers a comprehensive range of outcome-focused investment solutions designed to secure the long-term financial goals of institutional and individual investors. Nuveen has $1.3 trillion in assets under management as of 31 December 2024 and operations in 27 countries. Its investment specialists offer deep expertise across a comprehensive range of traditional and alternative investments through a wide array of vehicles and customized strategies. For more information, please visit Nuveen Securities, LLC, member FINRA and SIPC. The information contained on the Nuveen website is not a part of this press release. Certain statements made in this release are forward-looking statements. Actual future results or occurrences may differ significantly from those anticipated in any forward-looking statements due to numerous factors. These include, but are not limited to: market developments; legal and regulatory developments; and other additional risks and uncertainties. You should not place undue reliance on forward-looking statements, which speak only as of the date they are made. Nuveen and the closed-end funds managed by Nuveen and its affiliates undertake no responsibility to update publicly or revise any forward-looking statements. The annual and semi-annual reports and other regulatory filings of Nuveen closed-end funds with the Securities and Exchange Commission ('SEC') are accessible on the SEC's web site at and on Nuveen's website at and may discuss the above-mentioned or other factors that affect Nuveen closed-end funds. 4448966
