CEFs: Income Strategies for All Market Seasons

Douglas Albo submits: I received alot of comments on my piece regarding the three basic strategies most high-yielding equity-based Closed-End funds (CEFs) use to generate their income, and one common theme was that the Table could have been a little clearer and perhaps more applicable to the fund's market prices rather than just their NAVs.

By Douglas Albo: The following tables include year-to-date (YTD) and four-year NAV and market price performances for most of the equity based high yielding Closed-End funds (CEFs) available to investors, where "equity based" is defined as having at least 50% of a fund's portfolio invested in U.S. based or global stocks while "high yielding" is defined as a fund having at least a 6% annualized distribution.

By Douglas Albo: One of the first articles I wrote on Seeking Alpha back on January 6, 2011, was titled, "Income Strategies For All Market Seasons" and I believe it was the first article written by any author which discussed the basic income strategies that equity based high yielding Closed-End funds (CEFs) use to generate the income they pass on to investors in the form of high distributions and yields.

By Douglas Albo: In early 2010, I wrote an article titled "CEFs: Follow The NAV" in which I advised income investors in high-yielding equity-based Closed-End funds (CEFs) that if they wanted to find the best funds to invest in, they should pay close attention to the direction of a fund's Net Asset Value (NAV).

Douglas Albo submits: Sometimes it takes a swift kick in the pants to remind investors the price they are paying for an investment.

By Douglas Albo: This is the second of a two part series reviewing the Allianz/PIMCO equity based high yielding Closed-End funds (CEFs).

By Douglas Albo: About a year ago I suggested that income investors in high yielding equity closed-end funds (CEFs) should start looking at funds which utilized an option-income strategy to generate income for their large distributions as a two-year bull run in the market was likely to give way to a more sideways market period and play more into the hands of funds which utilized an option-income strategy as opposed to other income strategies.

By Douglas Albo: I will continue to stress to investors that the best equity closed-end funds (CEFs) for holding NAV value in a down market environment also happen to be some of the funds at the largest discounts among CEFs. Though no fund will escape unscathed in a bear market, option-income funds' NAVs can at least hold up much better than other CEF income strategies and even the broader market ... especially the funds with the largest option-coverages.