yes. A few months ago the yield from FAX looked real high, but since then the market value of many if not most closed end funds and reits has declined very signifigantly which caused their yields to increase greatly. As a long time investor in closed end funds I can tell you it hasn't been fun to see the market value of these closed end funds decline even though the income stream hasn't been affected at all yet.
Fixed income investors have many choices today to buy very high yielding closed end funds and reits if they have the money to invest. Many reits are yielding 15%+ and are selling at large discounts to book value.
So where is the money going that has been coming out of closed end funds and reits? I can only guess that more and more people are being enticed away from this type of investment to the bright lights in the tech sector.
I suspect that the competition for investment dollars flowing into the tech sector will continue and those who pick the right stocks will be happy and those who don't will lose a signifigant percent of that investment.
Closed end funds and reits are trading as though there is bad news on the horizon for them. I've looked at my crystal ball and it tells me nothing. Maybe someone else has a newer one with later technology. I would like to hear from them.
Axzl,without advising me, would you suggest a few quality closed end funds worth further investigation for a non US citizen.I need to diversify from a heavy bias towards oil and gas income funds. Thanks in advance, W
you could do some research on hrp, kmm, gsf, si, mmt, and fch in addition to fax. All have fairly good yield and sell at steep discounts to NAV. A word of caution on gsf, there could be dividend cut here but not for sure.
A hold to moderate sell, IMO. Three reasons, 1) the dividend policy. Any cut might cause the price to drop further. Not to try and frighten you....if you look at say PHT...a US non-leveraged, US only fund has a current yield of 13.6%. They are earning their dividend too. FAX earns only $.48 or 8.34% based on it's present price, they are leveraged and foreign(of couse that can work for you). To put a "earning" (what they earn per share)current yield of 12% on FAX the price would have to be $4. Reason 2)The continued flattening of the yield curve...short rates climbing faster then long rates..on top off all rates going up period. Reason 3) Y2K...whether it's hype or not...experts agree outside the US is worse than in the US and a good scare alone will hit the foreign currency market(no scare might cause a good pop too).
IMO, before I would not put any additional money in FAX I would want to make sure the Fund has a dividend policy they can leave with.
It's possible they held off buying more foreign paper last year because they expected the AUD to get stronger, it didn't happen.
One important issue is FAX has great liquitity, many shares outstanding. THis in itself will allow FAX to command a premium to it's peers.