- Interest in municipal closed-end funds (CEFs) vs. municipal bonds often stems from higher return potential - this is mostly due to the use of leverage in municipal closed-end funds.
- Leverage could potentially amplify both the fund's net asset value (NAV) and its distribution; however, investors should be aware of the rationale and risks behind leverage.
- While an extended period of demand for municipal bond CEFs has caused valuations to reach record premiums, distributions are still relatively high compared to other income-oriented sectors.
For further details see:
A Lesson On Leverage In Municipal Bond Closed-End Funds