BCV - Uncovering Shadow High-Yielding Closed-End Funds
In this article we address one of the interesting dynamics in the CEF market - the tendency of higher current-yield funds to trade at tighter discounts. We think this behavioral bias creates an opportunity for more patient investors that look beyond the current distribution rate to the trailing 12-month rate and, more broadly, to the historic pattern of fund's distribution that includes special distributions.
We call funds that repeatedly make special distributions Shadow High Yielders because these funds typically do not show up on typical fund screens that rely more on current distributions. The current