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Investius Interview: Capital Link’s CEF/ETF Conference in NYC – “CEF Yield”

by on May 20, 2015

2015-0518-CEFYieldIf you’re looking for yield, closed-end funds may interest you, says John Cole Scott of CEF Advisors. But remember, CEF distributions may change. [Watch Video]

John Cole Scott, CEF Advisors: Closed-end funds are more than yield and discounts.  They’re manager performance and they’re asset allocation.  So you don’t just pick a fund because it has a high yield.  It needs to fit in your portfolio.   You need to have a reason that you’re there.

Investius: If you’re one of many investors looking for yield, closed-end funds may interest you.  John Cole Scott of CEF Advisors even calls them, as he put it, “yieldy.”  That’s yield with a “y.”  But he also notes that closed-end fund distributions are not like bond coupons.  Payout levels may change, especially in a rising interest rate environment.

John Cole Scott: So a lot of closed-end fund investors don’t seem to realize that closed-end funds aren’t coupons or bonds.  I always say that closed-end funds are listed equities that either derive their value from equity or bond “guts.”  An d that the distribution policies are policies, not promises, and can’t be thought of like coupons on bonds… Ninety-seven percent of closed-end funds changed their distribution policy the last time rates went up.  Sixty-five or so percent did it, from our data, in the last year.  And almost half, 45%, did it in the last six months.  So you can’t think of a distribution policy as stable.  They go up and they go down, and you have to study them, from our research.

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