How a Top Advisor Uses Closed-End Funds

Commentary September 22, 2010 at 08:00 PM

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Here's this month's scenario, which focuses on using closed-end funds and was discussed with Michael R. Kelly, CFP, EA of Baltimore:

Clients (married couple) are in their mid-40s with $100,000 available to invest, seeking diversification and long-term growth, and are willing to accept moderate volatility.

What research tools do you use to identify prospective funds for clients?

I rely primarily on Morningstar Principia and Hertzfield's Guide to Closed-End Funds, a monthly newsletter.

What specific fund categories would you recommend for the scenario-clients' consideration?

Cash: 5 percent; Fixed income: 27 percent; Equity: 58 percent; Eclectic: 10 percent.

What specific funds and allocations would you recommend within those categories?

Cash: Taxable money market fund

Fixed income:

Fund	% of Portfolio
BlackRock Credit Allocation Income Trust (BTZ)	5
Bancroft Fund (BCV)	5
AllianceBernstein Income Fund (ACG)	6
First Trust Strategic High Income Fund (FHI)	6
Nuveen Tax-Advantaged Floating Rate Fund (JFP)	5

Equity:

Fund	% of Portfolio
Boulder Growth & Income Fund (BIF)	7
Morgan Stanley Frontier Emerging Markets Fund(FFD)	6
NFJ Dividend, Interest & Premium Strategy Fund (NFJ)	6
DCW Total Return Fund (DCW)	5
Central Securities Corp. (CET)	6
Royce Value Trust (RVT)	5
Alpine Total Dynamic Dividend Fund (AOD)	7
Tortoise Capital Resources Corp. (TTO)	6
RMR Asia Pacific Real Estate Fund (RAP)	6
Aberdeen Australia Equity Fund (IAF)	4