LIPPER'S BILL BRADFORD IS SITTING IN FOR DON CASSIDY THIS WEEK ON THE BUSINESS FOR BREAKFAST PROGRAM
Thursday, January 17
Q. This week, Lipper's Bill Bradford is pinch-hitting for Don Cassidy.Bill specializes in closed-end funds. Welcome.A. Thanks, nice to join you again.
Q. Before we start, Bill, can you give a definition of exactly what aclosed-end fund is ? How does it differ from an open-end fund?
A. A closed-end fund is created when investors pool their money for ashared investment goal, similar to open-end funds. But they differ in onevery distinct way. Shares of an open-end mutual fund can be redeemed ondemand. Shares of closed-end funds cannot. They are traded on exchanges,most notably the New York Stock Exchange.
Q. How many are there? How does that compare to open-end funds?
A. There are approximately 513 closed-end funds, while there areapproximately 6112 open-ends.
Q. How about a small year end summary for closed-end funds.
A. Sure, let's start with performance. On the whole, the averageclosed-end fund gained 8.2% (market price return). But there was quite adifference between bond and equity funds.
Q. Really? What was the difference?
A. The closed-end bonds averaged a positive 11.8%, while the equityaverage was a positive 1.4%. On a market price return basis.
Q. How does this compare to the open-end world, Bill?
A. The open-end equity funds lost 12.4% in 2001.
Q. Interesting?What was the best performing objective in closed-endequities?
A. Eastern European Funds for a return of 10.14% for 2001, because the 2Russia Funds did very well.
Q. Any other newsworthy notes regarding closed-end funds in 2001?
A. There certainly was for 2001. Initial public offerings or IPO's ofclosed-end funds were the heaviest since 1993, there were a total of 39 newfunds. 35 were bond funds, while four were equity. Nuveen was the topissuer of Municipal Bond funds with 20.
Q. Why were Municipal Bond funds so popular in 2001?
A. Investor caution played a big part, also low interest rates, whereclosed-ends bond funds had a slightly higher yield, and use of leverage ina closed-end fund creates a higher yield.
Q. How much money was raised in these closed-end fund IPO's?
A. Approximately $7.3 billion.
Q. Wow, certainly an impressive number.
A. Yes, especially when that IPO number compares with about $8.7 billionin net inflow into the more than 2,000 open-end MB funds for last year.
Q. Are there any Colorado managed closed-end funds?
A. Yes, there are three. The Denver Investment Advisor's Blue Chip ValueFund, it had a 14.1 % return (market price) in 2001, currently trading ataround a 7% premium, because it pays a high dividend yield. And theDelaware Colorado Insured Municipal Income Fund, which had a +18.2% return(market price), and currently trading at around a 1.9% discount. Also theBoulder Total Return Fund had a 29% return (market price), and currentlytrading around 1.1% premium.
Q. Thank you Bill.
