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BCSAX How on earth is this fund able to offer an 8.79% yield? "Broad basket commodities." Schwab shows no fee and no load--- AND it's on their "select list." Oh, goodie. What's THAT? I've spent today just window-shopping in every direction. https://www.morningstar.com/funds/xnas/bcsax/quote
A-ha! "The investment seeks total return. The adviser utilizes two strategies and under normal circumstances expects to invest approximately 50% of its total assets in each strategy. One strategy focuses on investments in commodity-linked derivatives. To meet coverage and collateral requirements associated with these derivative investments, and to invest excess cash, the fund holds a portion of its portfolio in investment-grade short-term fixed-income securities. The other strategy focuses on equity investments in commodity-related companies, including, but not limited to, companies operating in the mining, energy and agricultural sectors."
Crash. Are you just messing with us when you ask obvious questions? If you found the Select List it defines itself and explains how funds make the list. “Oh Goodie!”
So, is the 8.79% yield basically a pass-through of the ST 40% taxable income component from the commodity-linked derivatives trading then - or is this mostly coming from a bunch of high-yielding MLPs / pipeliners they are holding?
Crash. Are you just messing with us when you ask obvious questions? If you found the Select List it defines itself and explains how funds make the list. “Oh Goodie!”
No, not messing with you. I found ONE fund which happens to be on the Select List. It was so noted. What are the criteria for inclusion on that list? Those requirements are not AT ALL anywhere that is handy or obvious to see.
“The Select List is built by identifying the best combination of factors such as performance,risk,and expense.” Sorry I am an old guy and don’t know how to cut and paste. But if you follow a link the word “eligibility “ is another criteria. Think about that one. The world’s greatest fund,,,, if not available at Schwab,or with a transaction fee,, is not eligible and thus not on the list. Back in the old days at he local Schwab office they had a paper list. But Crash,,,, sometimes you gotta look for things.
Derivatives (options, futures) generate income. So, high distributions are typical for options/futures-based funds. Investors also use options to generate income - conservative call-writing, riskier put-selling.
Interesting line: ”Most derivatives are margin-powered, meaning you may be able to enter into them putting up relatively little of your own money. This is helpful when you’re trying to spread money out across many investments to optimize returns without tying a lot up in any one place, and it can also lead to much greater returns than you could get with your cash alone.”
Just to illustrate one possible method of boosting a fund distribution (in this case by a CEF I own):
*”The Fund may pay distributions in excess of its net investment company taxable income, and this excess would be a retum of capital distributed from the Fund's assets.”FOF Fact Sheet
Technically a “distribution” is not a ”dividend”. But taken at a glance may at first appear so.
Watch out! @Crash! Be sure to read the fine print.
I think it was Marty Zweig who said, “It’s treacherous out there.”
CEFs that have managed-distribution policies set an attractive distribution rate. But if that isn't supported by fund income, the difference is ROC - return of capital (i.e. your own money). ROCs aren't taxed on distribution but reduce the cost basis (thankfully, major brokers keep track of this), so when you sell, you end up paying higher tax.
Edit/Add. Interesting that FOF doesn't disclose the ERs attributed to its underlying funds in the usual documents. Its reported fee of 0.95% looks misleading for a CEF of CEFs.
That's another trick … Have you looked at ETFs of CEFs?
Yes, there anre some ETFs of CEF’s .
CCEF appears to be quite risk averse. If I had to recommend one, that would be it - just based on my experience in two other Calimos funds. But it is only a couple months old. Another which @yogibearbull has mentioned before is Boaz Weinstein’s CEFS which I recently sold. For my own purposes the closed end fund (of closed end funds) noted earlier works better.
Weinstein uses leverage on that one (CEFS) in addition to the leverage inside the CEFs it holds. (”Double your pleasure.”) He’s been very successful at his activist approach. He’s been on Blackrock’s tail recently trying to force them to convert at least one of their CEFs to an OEF and “unlock” shareholder value. He shorted treasuries in recent years which helped the fund greatly. His is a great fund based on past performance and Weinstein’s reputation. Just depends on what you need.
*The near 5% fee on CEFS is an eye-popper. But the actual management fee is around 1%, with the rest coming from acquired fund fees and interest on leverage,
Cautionary remark is noted. An interesting conversation in this thread. Taylor Swift is smart enough to play with CEFs. I've moved on. I was in IRL in the '90s, and came away with a small profit. That fund just closed within the past year.
Comments
"The investment seeks total return. The adviser utilizes two strategies and under normal circumstances expects to invest approximately 50% of its total assets in each strategy. One strategy focuses on investments in commodity-linked derivatives. To meet coverage and collateral requirements associated with these derivative investments, and to invest excess cash, the fund holds a portion of its portfolio in investment-grade short-term fixed-income securities. The other strategy focuses on equity investments in commodity-related companies, including, but not limited to, companies operating in the mining, energy and agricultural sectors."
Investors also use options to generate income - conservative call-writing, riskier put-selling.
Interesting line: ”Most derivatives are margin-powered, meaning you may be able to enter into them putting up relatively little of your own money. This is helpful when you’re trying to spread money out across many investments to optimize returns without tying a lot up in any one place, and it can also lead to much greater returns than you could get with your cash alone.”
Just to illustrate one possible method of boosting a fund distribution (in this case by a CEF I own):
* ”The Fund may pay distributions in excess of its net investment company taxable income, and this excess would be a retum of capital distributed from the Fund's assets.” FOF Fact Sheet
Technically a “distribution” is not a ”dividend”. But taken at a glance may at first appear so.
Watch out! @Crash! Be sure to read the fine print.
I think it was Marty Zweig who said, “It’s treacherous out there.”
58% in natural resource stocks. Other Natural resource funds have done some better recently
CEFs that have managed-distribution policies set an attractive distribution rate. But if that isn't supported by fund income, the difference is ROC - return of capital (i.e. your own money). ROCs aren't taxed on distribution but reduce the cost basis (thankfully, major brokers keep track of this), so when you sell, you end up paying higher tax.
ROCs are final only after the yearend, but the CEFs must report estimated ROC monthly; see April report for FOF. As FOF is a CEF of CEFs, ROCs can be from FOF or the underlying CEFs.
https://assets-prod.cohenandsteers.com/wp-content/uploads/2024/04/29181236/FOF-Section-19-Notice-Apr-2024.pdf
Have you looked at ETFs of CEFs?
Edit/Add. Interesting that FOF doesn't disclose the ERs attributed to its underlying funds in the usual documents. Its reported fee of 0.95% looks misleading for a CEF of CEFs.
CCEF appears to be quite risk averse. If I had to recommend one, that would be it - just based on my experience in two other Calimos funds. But it is only a couple months old. Another which @yogibearbull has mentioned before is Boaz Weinstein’s CEFS which I recently sold. For my own purposes the closed end fund (of closed end funds) noted earlier works better.
Weinstein uses leverage on that one (CEFS) in addition to the leverage inside the CEFs it holds. (”Double your pleasure.”) He’s been very successful at his activist approach. He’s been on Blackrock’s tail recently trying to force them to convert at least one of their CEFs to an OEF and “unlock” shareholder value. He shorted treasuries in recent years which helped the fund greatly. His is a great fund based on past performance and Weinstein’s reputation. Just depends on what you need.
*The near 5% fee on CEFS is an eye-popper. But the actual management fee is around 1%, with the rest coming from acquired fund fees and interest on leverage,