i'm not a CEF expert but i'd suggest the following:
1. if the fund mgr(s) is able to use their assets to generate returns better than the S&P 500 or their peer group, it seems like a good idea to buy that one. even at a small premium.
2. if the fund mgr(s) cannot beat the S&P 500 or their peer group, one should consider selling and finding a better investment.
i used to own BWC. they beat the S&P and sold at a discount to NAV. that seems like a steal. BWC rolled into BOE recently. i haven't compared BOE's performance to the S&P yet but i know it is trading at a discount to NAV and the managers of BOE are the same as BWC.
If you are thinking about BOE, you should know that their 12% distribution consists of 97% ROC. I was thinking of buying BOE until I was told by their corp office about ROC. I had to call 3 separate departments before getting an answer. Did not like that info at all. Amazing how they withhold that to potential investors. I will keep looking for something better. Good luck.
with regard to BOE and return of capital, as gates points out, it has to do with call writing. all this accounting BS can really make things tough to understand. with AOD, they could get one of those "one time special dividends" (like TWC) which is really a return of capital but per accounting rules they can call it earned income.
IMHO, cash recvd from writing a call is income. cash recvd from a "one time special dividend" is not income. yet the accounting folks call one return of capital and the other earned income.
I noticed last time I looked at it that BlackRock has BOE classified as an options arbitrage fund, so most of that ROC could be the options income from the fund writing covered calls. All the covered call funds declare large percentages of ROC in the distribution, but their NAV's and distributions have actually held up much better during the downturn than plain equity CEF's due to the high cost of option premiums. ETW and ETV are two examples.