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How a Top Advisor Uses Closed-End Funds

by Ed McCarthy, CFP, RICP

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Here’s this month’s scenario, which focuses on using closed-end funds and was discussed with Michael R. Kelly, CFP, EA of Baltimore:

Clients (married couple) are in their mid-40s with $100,000 available to invest, seeking diversification and long-term growth, and are willing to accept moderate volatility.

What research tools do you use to identify prospective funds for clients?

I rely primarily on Morningstar Principia and Hertzfield’s Guide to Closed-End Funds, a monthly newsletter.

What specific fund categories would you recommend for the scenario-clients’ consideration?

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Cash: 5 percent; Fixed income: 27 percent; Equity: 58 percent; Eclectic: 10 percent.

What specific funds and allocations would you recommend within those categories?

Cash: Taxable money market fund

Fixed income:

Fund

% of Portfolio

BlackRock Credit Allocation Income Trust (BTZ)

5

Bancroft Fund (BCV)

5

AllianceBernstein Income Fund (ACG)

6

First Trust Strategic High Income Fund (FHI)

6

Nuveen Tax-Advantaged Floating Rate Fund (JFP)

5

Equity:

Fund

% of Portfolio

Boulder Growth & Income Fund (BIF)

7

Morgan Stanley Frontier Emerging Markets Fund(FFD)

6

NFJ Dividend, Interest & Premium Strategy Fund (NFJ)

6

DCW Total Return Fund (DCW)

5

Central Securities Corp. (CET)

6

Royce Value Trust (RVT)

5

Alpine Total Dynamic Dividend Fund (AOD)

7

Tortoise Capital Resources Corp. (TTO)

6

RMR Asia Pacific Real Estate Fund (RAP)

6

Aberdeen Australia Equity Fund (IAF)

4

Eclectic:

Fund

% of Portfolio

The Gabelli Global Deal Fund (GDL)

5

Guggenheim Enhanced Equity Income Fund (GPM)

5