ETF Spotlight on the PowerShares CEF Income Composite Portfolio ETF (NYSEArca: PCEF), part of an ongoing series.
Assets: $502.5 million.
Objective: The PowerShares CEF Income Composite Portfolio tries to reflect the performance of the S-Network Composite Closed-End Fund Index, which is comprised of closed-end funds that invest in taxable investment grade fixed-income securities, taxable high-yield fixed-income securities and others utilize an equity option writing (selling) strategy.
Holdings: Top holdings include Eaton Vance Tax-managed Global CEF 4.9%, AllianceBerstein Inc Fund CEF 3.2%, Eaton Vance Tax-Managed Dive CEF 3.7%, Allianz NFJ Dividend Inter CEF 2.4% and BlackRock Enhanced Equity Dividend CEF 2.3%.
What You Should Know:
- Invesco PowerShares sponsors the fund.
- PCEF has a 1.73% expense ratio.
- The fund has 142 holdings and the top ten make up 25.0% of the overall portfolio.
- The ETF has an SEC 30-day yield of 7.2%.
- Allocations include: bonds 44.1%, high-yield bonds 17.7%, domestic equity 3.1% and option income 34.4%.
- PCEF is up 2.1% over the past month, up 3.4% in the last three months and up 8.6% year-to-date.
- The ETF is 2.5% above its 200-day exponential moving average.
- Closed-end funds are publicly traded investment companies that have raised a fixed amount of capital through an initial public offering then listed like a stock on an exchange.
- CEFs represent a fixed basket of securities, and the funds can be traded like any stock or ETF on an exchange.
- Unlike ETFs, closed-end funds can trade at a premium or discount to its net asset value because there is a fixed number of shares outstanding.
- CEFs offer higher distribution rates than mutual funds in the same category because most CEFs were created with a focus on income.
Next Page: The latest news on PCEF
The Latest News:
- PCEF reached the $500 million mark on May 9, 2013, according to a press release.
- “By adding closed-end funds, or CEFs, to your investment arsenal, you can expand your menu of options when it comes to security selection,” according Mike Taggart, associate director of closed-end fund research at Morningstar.
- In the bond market, most observers are carefully watching interest rate risk.
- “The odds of interest rates going up – just from a common-sense point of view – is very high,” Bob Rice, managing partner at Tangent Capital, said, reports The Market Oracle. “And if that happens many of these bond funds will suffer 20%, 30%, 40% declines in value.”
PowerShares CEF Income Composiite Portfolio ETF
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.
Updated to correct holdings in the S-network Composite Closed-End Fund Index.