Home etftrends.com How Active Management Can Bolster Closed-End-Fund Investing

How Active Management Can Bolster Closed-End-Fund Investing

Investors have long considered closed-end-fund (CEF) exposure due to their potential for higher returns. A good CEF can be a vital capital-appreciation workhorse within an investment portfolio.

While CEFs can, at times, experience volatility and lower liquidity, these risks are offset by the potential for steady and higher income streams. CEFs can also be purchased at a discounted price—lower than their net asset value—offering built-in arbitrage potential. These advantages come with the bonus of tax efficiency compared to traditional trading options.

Closed-End-Fund Investors Want More than a One-Trick Pony

CEFs in the ETF wrapper can be broadly categorized into two main types: passively managed and actively managed. While most ETFs passively track an underlying index, actively managed ETFs aim to outperform indexes by employing a more dynamic investment approach. Many CEFs on the market are passively managed, which often limits their scope.

Using the flexibility of an actively managed strategy, Calamos CEF Income & Arbitrage ETF (CCEF) aims to offer the best of both worlds, seeking CEFs trading at deep discounts and providing higher yields. The Calamos investment team applies decades of closed-end fund management lessons in its search for valuable closed-end funds trading at steep discounts. The Calamos team believes these funds have tremendous appreciation potential. That’s because markets have gotten it wrong and underestimated their inherent value. The key word here is “valuable” because the alpha potential could be significant when these funds do come back. And, in many cases, these CEFs are compelled to offer investors higher distributions because of their discounts.

CCEF Strikes the Right Balance for Closed-End-Fund Investing

Matt Kaufman, Calamos senior vice president and head of ETFs, recently spoke to VettaFi about the advantages of the actively managed strategy at the reins of CCEF. He noted that the strategy enables the Calamos team to adaptively capture value through various closed-end funds trading at discounts.

“I view active management as important to finding closed-end funds trading at attractive discounts but paying high monthly income. So, I think it’s struck the right balance there,” Kaufman noted.

Since the ETF’s launch in January 2024, CCEF has provided a 6.07% gain in NAV as of March 31, 2024.

For more news, information, and analysis, visit the Alternatives Channel.

Disclosure Information

Before investing, carefully consider the fund’s investment objectives, risks, charges and expenses. Please see the prospectus and summary prospectus containing this and other information which can be obtained by calling 1-866-363-9219. Read it carefully before investing.  

An investment in the Fund(s) is subject to risks, and you could lose money on your investment in the Fund(s). There can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.  

Risks of investing in the Fund include risks associated with (1) the Fund’s investment in closed-end fund shares; (2) the closed-end funds’ investments; and (3) any other investments of the Fund, including investments in ETFs, BDCs, and derivative instruments. The shares of closed-end funds may trade at a discount or premium to, or at, their NAV. The securities of closed-end funds may be leveraged. As a result, the Fund, may be exposed indirectly to leverage through an investment in such securities. An investment in securities of closed-end funds that use leverage may expose the Fund to higher volatility in the market value of such securities and the possibility that the Fund’s long-term returns on such securities (and, indirectly, the long-term returns of its shares) will be diminished.

Additional Information

In addition, closed-end funds are allowed to invest in a greater amount of illiquid securities than open-end mutual funds. Investments in illiquid securities pose risks related to uncertainty in valuations, volatile market prices, and limitations on resale that may have an adverse effect on the ability of the fund to dispose of the securities promptly or at reasonable prices. The Fund may invest in BDCs, which typically operate to invest in, or lend capital to, early stage-to-mature private companies as well as small public companies.

The Fund’s investment in shares of ETFs subjects it to the risks of owning the securities underlying the ETF, as well as the same structural risks faced by an investor purchasing shares of the Fund, including authorized participant concentration risk, market maker risk, premium-discount risk and trading issues risk. Derivatives are instruments, such as futures and forward foreign currency contracts, whose value is derived from that of other assets, rates or indices. The use of derivatives for non-hedging purposes may be considered more speculative than other types of investments.  

Calamos Financial Services LLC, Distributor  


Calamos Financial Services LLC  
2020 Calamos Court | Naperville, IL 60563  
866.363.9219 | www.calamos.com | [email protected]  
2023 Calamos Investments LLC. All Rights Reserved.  
Calamos and Calamos Investments are registered trademarks of Calamos LLC. 

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