Closed End Funds: Bruised But BeckoningJeffrey M. Laderman
The market has no mercy. If the past year was rough on mutual funds, consider the plight of the closed-end funds. Not only did their portfolios buckle under the weight of rising interest rates but investors dumped them by the bushel. Closed-end fund investors have to sell their shares on the open market instead of requesting the fund company to redeem them. And as they sold out, share prices dropped much farther than the underlying value of their investments: Equity funds saw their portfolio returns drop by 4.6%, while share prices fell 12.5%. Bond funds, with a 3.9% loss in portfolio return, took an even bigger hit--14.9%.
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