Closed End Funds

Closed End Funds

Closed-end funds are marketed at full price but often trade at a discount after that. some tools allow screening:

• fidelity
• nuveen
• etrade allows to check nav discount for a given CEF.

The following factors should be taken into account:

• leverage (risk of ruin), expense ratio (should be less than 2%, can find good actors at 0.6% and bad actors at 7%)
• mandate (investment mandate should be wide to maximise opportunities)
• discount should be mean reverting
• NAV of the fund should be stable or going up (or else, CEF distributes too much)

CEF by Market Cap

CEF by Discount

CEF of interest

• ADX a SP500 like fund at 0.6% expense with discount at 11%, exists since 1929
• EOS buy/write on all liquid option stocks
• EOI same as EOS with different discount
• PDX credit income strategy
• QQQX Nasdaq 100 with lower vol (looks like a buy/write) with discount
• BCX ressource and commo stock (shel, xom, bp., tte...) and derivatives, looks like buy/write
• PEO resource and commo stocks, no derivatives

Total Return vs SP500

CEF might be charging high inception marketing fees, but they are managed professionally after that. There is no risk of investor pulling their money away from the fund. We see performance that range from value (for PEO and BCX which are commo oriented) to similar to SPY. However, it hard to beat the index with a diversified portfolio given the concentrated bets it contained in the past 10 year. The funds that perform similarly are arguably closet indexers.

• BXMX and BDJ are call write products, the performance is much lower than SP500, confirming that volatility premium is not high enough in that bull market compared to SPY
• PEO and BCX invested in commo/ressource extraction stocks, and therefore perform much less than SPY
• Best past performers had SPX as target