At High Yield Landlord, we discuss the pros and cons of REIT closed-end funds in our Course to REIT Investing. In short, they allow investors to:
- Gain diversified exposure to REITs.
- Enjoy professional management.
- Earn a superior yield to most ETFs.
However, there also are many downsides to REIT CEFs. Most importantly:
- They charge high fees.
- They use excessive leverage.
- And more often than not, they "closet index," which means that they claim to be actively managed, but in reality, own a very similar portfolio as the benchmark. It lowers career risk for managers because