To help investors capture the potential opportunities in the CEFs space, Saba has come out with the actively managed Saba Closed-End Funds ETF (BATS: CEFS). CEFS tries to generate capital appreciation and high income by investing in closed-end funds that trade at a discount to their net asset value while hedging the ETF’s risk to rising interest rates. CEFS shows an annualized distribution yield of 8.37%.
“Daily investment decisions are made by portfolio managers with extensive backgrounds investing in closed-end funds and ETFs, who seek to capitalize on a wide range of opportunities,” Paul Kazarian, Portfolio Manager at Saba Capital, said.
Kazarian explained that Saba follows a proprietary screening tool that generates real-time scores for closed-end funds which are ranked across a variety of factors, including historical premium/discount, earnings coverage, undistributed net income, shareholder friendly provisions, activist holders, leverage ratio, maturity and duration, yield, volatility metrics, issuer and expense ratio, security-level portfolio analysis, manager and asset class.
Furthermore, the team hedges against interest rate in an effort to protect investors from the rate risk associated with the underlying fixed income securities of many closed-end funds.
When incorporating something like CEFS into a diversified investment portfolio, Kazarian said the fund can act as part of the fixed-income allocation – the ETF includes a 73% tilt toward fixed-income assets. Additionally, CEFS may be included in the alternative sleeve for high yield and income generation.
Financial advisors who are interested in learning more about closed-end funds can watch the webcast here on demand.