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CFA Tampa – Slides & Audio Links: “Crash Course in CEFs, Benefits and Risks in a Rising Rate Environment”

by on May 17, 2013
We wanted to share our most recent presentation on CEFs. In the presentation, we have new data on relative volatility (CEF market price vs. NAV) and volume trend data for the six major CEF groupings. 
John Cole Scott, EVP, Portfolio Manager Closed-End Fund Advisors
May 14, 2013 at The University Club of Tampa 
“A Crash Course in Closed-End Funds: Benefits and Risks for a Rising Rate Environment”
PDFed Slides:
Audio File in WMA Format. (59 minutes)

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  1. Patrick Freeny permalink

    I’ve been waiting for some insight into CEFs in a rising interest rate economy. Despite the title, you never really addressed this and I’m sure that are lots of us that would like to hear your insights on how to approach this inevitable economic environment.

  2. Patrick, Thank you for the comment. It is true there wasn’t a slide that specifically covered this topic, but it was the theme that held the presentation together. If you listened to the audio file you would have heard the following points about how to adjust your portfolio for rising rates. 1. Focus on funds that look the be earning their dividend, have above peer-ave NAV total return and are not too expensive (relative or comparable discounts). This cannot guarantee success, but is very important in my opinion.

    Also, understand the cost and source of leverage so you can see how income may be squeezed based on the yield curve moving forward.

    We recommend most investors stay diversified in an portfolio of CEFs with a combination of US equity, global equity, taxable bond and municipal bond fund exposure. At what levels for each area is unique to each situation and cannot be given in this forum.

    We see lots of investors currently in a buy and hold scenario (or too scared to act) with funds at narrow discounts or moderate premiums that have more risk than we are comfortable for our clients. They don’t always notice if the dividend level is currently being earned or even if it is realistic.

    When rates rise there will be headwinds in the CEF world vs. the 4 year tailwind that has been very profitable to many. My goal with the talk is to give folks the perspective and tools to make these decisions going forward.

  3. Patrick Freeny permalink

    That was helpful

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