The NAVigator

Tom Roseen, head of research services at Lipper Refinitiv, says that closed-end fund discounts currently stand at an average of 8.7 percent, significantly wider than the 5.65 percent of the past but significantly improved from February and March as closed-end funds were hammered during the pre-pandemic market downturn. Roseen notes that convertible-securities funds have been exceptionally strong during the bounce back -- up 25 percent over the last three months -- but that energy MLP funds remain down more than 58 percent and that natural resources funds are down 34 percent as they struggle to regain footing; he expects those trends to continue as the economy and the closed-end space slowly recover.

Kimberly Flynn, managing director of alternative investments at XA Investments, talks about the new and different ways alternatives are being packaged in closed-end funds and how investors and fund companies deal with discounts and new structures in order to invest in assets that otherwise wouldn't be available to individuals. She also discusses auction funds and hybrid funds, new ways to put alternatives and real estate into portfolios that are just being brought to market now, but which have big potential for the future.

Gregg Bell, co-founder of A3 Financial Investments -- which runs the A3 Alternative Credit Fund -- discusses why investing in alternative credits like reverse mortgages, private credit, credit-linked notes and more can create income streams that wouldn't be available to most individual investors without the closed-end, interval fund structure. Bell -- whose fund is positive this year and up nearly 9 percent since opening in October 2019 -- says that few retail investors have exposure to the alternative credit market, and explains how and why they could benefit from thinking beyond Treasuries and corporate bonds.

Financial journalist Steven Bavaria of SeekingAlpha.com -- author of 'The Income Factory: An Investor's Guide to Consistent Lifetime Returns" -- talks about how current market conditions should have investors looking to closed-end funds as a way of generating consistent income streams. Bavaria compares closed-end funds to factories, where the company owners are more concerned with the production they get from the workshop rather than the moment-by-moment value of the building. He notes that the strategy is particularly comforting now as a balance to market news and noise.

John Cole Scott, chief investment officer at Closed-End Fund Advisors and the founding chairman of the Active Investment Company Alliance, returns to the NAVigator for a fresh look at where closed-end funds stand now. It was a big rebound for CEF issues in the second quarter, with strong gains despite facing an environment of heavy dividend cuts; while closed-end issues remain down on average for the year, Scott notes that wider discounts make them particularly attractive at this point, especially for income-oriented investors. He also provides two closed-end funds he thinks are worth a look-see now.

Neil Azous, chief investment officer at Rareview Capital in Stamford, Conn., discussed how the four ways that investors typically make money in municipal-bond closed-end funds typically aren't all in favor at the same time. These times, however, are anything but typical, and Azous says that in the current unusual times, all four potential return streams are lining up in ways that make muni funds a particularly attractive option right now.

Larry Antonatos, managing director / portfolio manager at Brookfield Asset Management, says 'the depths of uncertainty and the market lows surrounding coronavirus are behind us.' The manager of Brookfield Real Assets Income Fund, said the firm's real asset managers are positioning now for a recover -- which he noted may not be particularly strong -- by focusing on areas where valuations are most attractive and recovery-driven cash-flow growth should be strongest. That means hotels, retail real estate, airports and more.

Zach Forman, head of fund relations at Griffin Capital Securities -- which runs the Griffin Institutional Access Real Estate Fund -- says that the illiquidity of interval funds can be a real benefit to investors during turbulent times, not only by providing access to private markets that many investors couldn't access otherwise, but by giving managers the ability to run a fund without fearing withdrawals while forcing investors into longer-term thinking.

Michael Spatacco, director at Bancroft Capital, says that closed-end funds were an overlooked investment type for years, largely because the structure used for selling new issues put investors at a disadvantage. With that negative now mostly gone, however, he believes closed-end funds can be a particularly effective investment tool, and that new issues no longer need to be avoided when they open. He also explains how his firm incorporates closed-end fund investing into its mission of helping veterans.

Phillip Goldstein, co-founder of Bulldog Investors and a leading activist investor in closed-end funds, discusses a recent Securities and Exchange Commission decision that he says protects the fund operators at the expense of shareholders, and which he believes will widen discounts and make closed-end funds less attractive in the future.