Written by David Fabian, July 12th, 2017
If you dabble in the closed-end fund market long enough, you are probably going to own a fund that sees its dividend cut. This seemingly innocuous event can have numerous ripple effects for shareholders that should be carefully evaluated before you respond with any knee-jerk reactions. Read more
Written by David Fabian, March 28th, 2017
There are many stories and books written about the risks of ETFs. Some of these are derived from real-world events, while others are simply speculation about what might come to pass under extreme circumstances. There is also a subset of perceived risks in related asset classes that may not have anything to do with ETFs at all.
The difficult part for investors who use these tools is discerning whether the risks are real, imagined, or simply overstated for the benefit of grabbing your attention. To help shine some additional light on this subject, I want to explain some of the most commonly touted risks and look at various strategies to mitigate them.
Written by David Fabian, February 16th, 2016
Investing isn’t always easy and 2016 has certainly proven that volatility in the stock market can lead to significant shifts in investor sentiment and philosophy. A correction of this nature should be viewed as an opportunity to analyze your current strategy to ensure its measuring up to your expectations. What it should not do is cause you to deviate from a sound philosophy of investing to a gamblers streak of speculation.
Let me explain what I mean by that…. Read more
Written by Michael Fabian, February 11th, 2016
While we are huge proponents of leveraging low cost and liquid ETFs for virtually every asset class; ETFs that invest in closed-end funds (CEFS) are a different story altogether. The two funds that have garnered the most investor attention in this space are the PowerShares Closed End Fund Composite ETF (PCEF) and the Yieldshares High Income ETF (YYY). Both contain a seemingly diverse array of underlying asset classes, sectors, and strategies. Read more
Written by Michael Fabian, December 18th, 2015
It’s been a tough year for closed-end fund (CEF) investors as risk asset volatility, a slump in credit, and general unease over the Federal Reserve’s long anticipated rate increase has widened discounts. However, many CEFs are still awarding investors with large end-of-year special distributions. In a CEF wrapper, a fund is forced to distribute any underlying portfolio earnings above and beyond its stated distribution policy to avoid paying taxes at the fund level.
This income gap is often referred to as undistributed net investment income (UNII). Furthermore, since many funds employ rather conservative board-mandated policies, they dictate that fund earnings should be well in excess of regular monthly or quarterly distributions to avoid dividend cuts. Read more