My subscribers are the best. Investors Alley’s newsletter services have evolved to allow a lot of back-and-forth communication. We have lively discussions during webinars, and my subscribers regularly contact me with their questions and ideas.
Last week, I published an article discussing an ETF that is a fund of funds that holds closed-end funds (CEFs), the Amplify CEF High Income ETF (YYY). I received several comments about it, and a subscriber emailed me and suggested that I check out another ETF that holds a portfolio of CEFs. So I did.
Let’s take a look at the Saba Closed-End Funds ETF (CEFS).
CEFS launched on March 21, 2017, so it has nearly a 10-year track record. The fund has assets of $427 million. Fund expenses total 2.61%, but it is important to note that CEFS includes the portfolio holdings expenses of 1.32% in the total expenses number.
CEFS pays a $0.14 per share monthly dividend, giving a current distribution rate of 6.63%. However, the fund has paid year-end dividends, boosting the cash return. The special dividends for the last four years have been $0.68, $0.41, $0.21, $0.34, and $0.27 per share, sequentially. For comparison, YYY yields 12.5%.
CEFS is more of a total return investment rather than a pure income play, which differentiates it from most of the CEF universe. Through the end of June, the one-year total return was 23.73%. The three and five-year annualized returns were 21.09% and 14.01%, respectively.
CEFS has a significantly lower yield compared to YYY, but has posted excellent total return numbers. Let’s compare the two ETFs over the last five years:
The data is interesting. The CEFS share price return matches the YYY total return. With dividends reinvested, CEFS blows away the competitor ETF. I took a look at the three -year returns, and the chart looks the same.
If you are looking for a CEF fund of funds, CEFS is the one to own.
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