Closed-end funds may be option for retirees searching for portfolio income

Nov 3, 2020 | In The Media

Many closed-end funds use leverage, subject to regulatory limits, to juice their returns. That is, they can borrow money to invest. However, leverage also means that losses can also be exacerbated.

“That’s something we take into consideration,” said CFP Robert Finley. “When you look at [an investment] that’s really beaten down, we’re more open to leverage.

“But in typical times, we avoid leverage because doing so provides more protection on the down side,” said Finley, a principal at Virtue Asset Management in Chicago.

As for cost, there’s a wide range.

“If you look at a leveraged closed-end fund, the expense ratio could be over 2%,” Finley said. “But some of the muni-bond funds we use are 0.3% or 0.4%. It differs by sector and asset allocation.”

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