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Burns: Well Mike, thanks for sharing that insight on just how investors should look at the distribution yields from a closed-end fund, and also for those great ideas. Burns: I'm Scott Burns, director of ETF and closed-end fund research for Morningstar. Again, this is not really a core holding, but it's a little higher credit quality. About 40% of that expense ratio comes from the costs of leverage.Scott Burns: A couple of high-yield ideas from the closed-end fund space. I'm Scott Burns, director of ETF and closed-end fund research with Morningstar. Burns: First of all, when we talk about yield with closed-end funds, there's a common mistake that so many investors make. Investors really don't understand this fully, I don't believe. Closed-end funds are great vehicles for delivering yield. Taggart: First of all, both of these ideas, neither of them have the return of capital component to them. The first idea is Dreyfus High Yield Strategies Fund. Burns: [laughs] Taggart: That equates to about a 2% discount of its NAV, and that's just a little over 13% yield on the fund. One of the reasons I like this fund is that just in March the board of directors hiked the payout by 23%. This is something satellite maybe, for an opportunity to give your overall portfolio a little boost. Joining me today is Mike Taggart, our closed-end fund strategist. Maybe you can talk a little bit about what the composition of that yield is, and what they should look for? When you look at the distribution that you're receiving from a closed-end fund, it's really important to look at the source of that distribution. It's return of capital, where they are actually returning your invested capital to you. A lot of times you'll see investors flocking towards the funds with the highest headline yield, when it's not really a yield at all. You actually wrote a great piece of that in your most recent closed-end fund weekly. The second reason is with closed-end funds, when they're paying these out monthly, they have undistributed net investment income. We're going to talk to him a little bit today about the short-term funds that he runs, including PIMCO Short-Term Bond Fund (PTSHX), which is the main product that he operates. First of all, cash management is at the forefront of most people's mind, especially with all the volatility in the broader markets these days.The way we really think about it--starting with the macro and the macroeconomic themes--it's very important now, more than ever, to be really encapsulating in your investment thesis what's going on with differentiating global central-bank policies.
Off-Balance Sheet Items The credit risk exposure attached to off-Balance Sheet items has to be first calculated by multiplying the face value of each of the off-Balance Sheet items by ‘credit conversion factor’ as indicated in the table below.
Closed-end funds have to report the cost of their leverage as part of their expenses. And like most closed-end funds, it's not highly liquid.