Blue Bell Private Wealth Management

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INVESTING

Closed-End Funds

A Closed-End Fund (CEF) is a type of collective investment fund. A CEF has an asset manager who invests a portfolio of investments in order to meet the fund’s investment objectives.

Our income is derived solely from our clients, our loyalty is to our clients not a large bank.

Closed-End Funds have a fixed number of shares that are traded on a stock exchange throughout the day.  

Once the necessary capital is raised, the fund is “closed” to new investors and the shares will now begin trading in the secondary market.  Purchase price is determined by SUPPLY and DEMAND, this may be different from the Net Asset Value (NAV) of the fund.  If you purchase shares at a price that is lower than NAV, you have bought the shares at a discount.  If you purchase shares at a price that is higher than NAV, you paid more then the fund is currently worth – a premium.

Advantages

  • Opportunity to buy at a discount
  • Higher distribution yield
  • Discounts may narrow
  • Efficient management
  • Inefficient/Underfollowed asset class
  • Ability to control market price and timing with purchases and sales throughout the trading day

Benefits

  • We only recommend purchasing a Closed-End Fund (CEF) when they trade at a discount to their Net Asset Value (NAV).
  • Why pay a PREMIUM when there are many Closed-End Funds available at a DISCOUNT?
  • Our rule is to never purchase a CEF as a new issue. We follow this rule because when a CEF is a new issue they are offered at a premium to NAV.

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