This Day On The Street
Continue to site
ADVERTISEMENT
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

Closed-End Funds Slump Amid ETF Surge

"ETFs are primarily equity-oriented, while the average closed-end fund buyer is looking for income," says Mariana Bush, CEF analyst at Wachovia Securities.

Bush and others point out that there are only a handful of fixed income ETFs, compared with 457 bond CEFs at last count. And of the 178 equity CEFs, many use covered calls or leverage to increase yields, neither of which is available in an ETF.

Bush attributes part of the October selloff to investors unfamiliar with the CEF structure who sold when the market turned too quickly for them.

"There have been a lot of closed-end fund IPOs this year and their high yields have been catching peoples attention," says Bush. "But not all the buyers should have been in CEFs because they don't understand the risks associated with leverage."

Yield is not the only thing investors can't get from an ETF, says Greg Drake, managing director at Claymore Securities, a firm which oversees CEF assets of $12.5 billion. Drake says the typical CEF buyer is looking for active management, another property index-based ETFs can not offer.

"Every structure has its day," says Drake. "Passive investing is popular now, however, if the S&P Index maintains its trading range for much longer, then people will be looking for active management again."

To view a video take of Gregg Greenberg's mutual fund report, click here .

3 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
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.95 0.00%
FB $78.99 0.00%
GOOG $537.90 0.00%
TSLA $226.03 0.00%
YHOO $42.51 0.00%

Markets

DOW 18,024.06 +183.54 1.03%
S&P 500 2,108.29 +22.78 1.09%
NASDAQ 5,005.3910 +63.9670 1.29%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs