First Trust Advisors will be making the move from closed end fund to exchange traded fund (ETF). Shareholders voted to make First Trust Value Line Dividend Fund an ETF. The fund was continually trading at a discount, so the solution to their problem is to close the fund and open it up as an ETF.
The ETF will begin trading on Monday and will track an index designed to invest in stocks with above-average dividends and also have potential for capital appreciation.
Jen Ryan of TheStreet.com explains that it is not unusual for closed end funds to trade at a discount, because there is a fixed number of shares issued that can be traded. So when it trades at a discount, there isn’t much demand for the fund. With this move to an ETF, could we see more closed end funds reorganize?
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