Tuesday, January 23, 2018
Remember risk and return still matter, despite a bonkers stock market. There is an income-focused closed end interval that is raising capital that highlights risk and return. This fund is paying a distribution of approximately 4.5%, or less. This is a high yield fund that plans to use leverage to enhance its returns. I don't see how a leveraged high yield fund that is only paying a 4.5% distribution is competitive. It's an interval fund so liquidity is limited. There are a number of fully liquid traded funds with similar objectives that are paying yields of 9.0% or higher. These yields show the risk of leveraged high yield funds. Why would anyone want to invest in a fund that gives full risk while providing only half or less than the yield (return) of competitive investments? WHY?