2 Volatile Closed-End Funds To Consider Amid Market Panic

2025-04-08 12:25:19 ET

Summary

• Closed-end funds (CEFs) often use leverage in an attempt to boost returns, making them volatile and sensitive to corrections and bear markets.
• This additional volatile nature of leverage is also on top of the discount/premium mechanic that also adds even further increased volatility.
• Usually, in market sell-offs, the leverage combined with the discount/premiums make these trades particularly wildly, but that is also where the best opportunities tend to be in these investment wrappers.

Written by Nick Ackerman, co-produced by Stanford Chemist

Closed-end funds often employ leverage in an effort to generate higher potential returns, which primarily come from the higher-than-usual distributions that they pay out. That can make them particularly sensitive during times of market corrections and bear markets as the downside of this is that the downside is also amplified....

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