Closed End Funds

What is a closed end fund (CEF)? It is simply a publicly traded investment company. CEFs raise funds like any public company meaning they sell shares. Funds from share offerings are used to buy securities. The securities may be common stocks or bonds or any of a number of other potential investments.

While we have historically shied away from investing in closed end funds we have found that there are a limited number of securities that fit our investment needs.

Our historical problem with closed end funds is that many times they have rather higher expense ratios and additionally tend to use a large amount of leverage. While leverage is positive when the holdings of the fund are moving higher they obviously are a huge negative when holdings are moving lower as they magnify the losses.

In addition most CEFs do not meet our conservative needs. We are typically looking for a 6 to 8% annual return on our investments. We prefer to accomplish these returns with a minimum of volatility and seldom have CEFs traded in narrow ranges.

Below we list a limited number closed end funds which either do meet our needs or may be potential holdings.