This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Heeding Income's Call

For a video presentation of this report from Gregg Greenberg, click here.

As Jim Cramer likes to say, there's always a bull market somewhere. You just have to find it.

So investors tramping through the beleaguered new-issue market shouldn't call off the hounds just yet. There's a spot you may have overlooked: covered-call closed-end funds.

Closed-end funds are actively managed mutual funds that trade essentially like stocks. Covered-call closed-end funds follow a strategy that, in its most basic form, involves buying shares and then selling call options on the same shares. This forfeits stock-appreciation gains but produces solid premium and dividend income. With bond yields low and the stock market sputtering, these funds are suddenly in great demand.

Over 15 new funds employing variations on the strategy have gone public since the Madison/Claymore Covered Call Fund (MCN) kicked off the craze last July with a $260 million offering. The IPOs have raised more than $10 billion in less than a year.

One fund that cannonballed into the market with a major splash this February was the NFJ Dividend Interest and Premium Strategy Fund (NFJ). The NFJ, which is co-managed by three separate investment firms under the larger umbrella of Allianz Global Investors, became the largest unleveraged closed-end IPO in history when it raised just under $2.5 billion.

And the pipeline for new product remains full, even after the yearlong blitz. New offerings in the category are soon to be released from closed-end powerhouses such as Blackrock, Nuveen and Pimco.

"This fund style is positioned to outperform in three of four markets: down, flat and modestly positive," says Tom Faust, chief investment officer at Eaton Vance. The firm has brought three covered-call funds to market in the past year, including April's $450 million IPO for the Eaton Vance Tax-Managed Buy-Write Income Fund (ETB).

"Only during rampant bull markets do covered-call funds have difficulty, but nowadays people's expectations are modest, so these funds should continue to be popular," Faust adds.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BBY $31.67 0.19%
ETB $16.14 -1.80%
EV $33.94 1.30%
GOOG $708.09 0.95%
INTC $29.89 -0.03%


Chart of I:DJI
DOW 17,679.20 +18.49 0.10%
S&P 500 2,044.85 -5.78 -0.28%
NASDAQ 4,695.1520 -21.9420 -0.47%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs