Portfolio manager Peter Vanderlee of ClearBridge Investments says investors may find a “trifecta” investment opportunity in some equity-based closed-end funds.



We’re talking about opportunity. In terms of potential opportunity for investors, what closed-end fund sector or asset class do you find most interesting at this time?


Peter Vanderlee, ClearBridge Investments

There’s a tremendous demand for income in general. And the U.S. has 76 million Baby Boomers that are going into retirement. And when you think about it, in retirement they need nothing short of an investment trifecta. They need income to supplement a general lack of savings. They need income growth to stay ahead of inflation. And they also need capital preservation as they are in the retirement years of their lives and cannot afford to take undue risk. There are asset classes within equities that I believe offer that investment trifecta, such as dividend-paying stocks and energy MLPs and REITs, just to name a few, where you see healthy dividends, you see healthy income streams, in other words, and you see also the potential for income growth over time… And the potential for capital appreciation over time, so that investment trifecta, from an opportunity standpoint, is very much present in the equity space and not so much, in my view, in the fixed income space.    


Jonathan Morgan, Canadian General Investments

I would be hesitant about there being anything very interest-rate sensitive because we just don’t know what’s going on. But I think that there are probably, again, in the equity area, there are some asset classes that are trading in very wide discounts.   And if those come back into favor you might see the discounts close as well as the underlying asset behave very well.


John Cole Scott, CEF Advisors

So, we have been very strong proponents of the closed-end fund wrapper structure in the master limited partnership space. But one thing we’ve done with our data and research in the last year is to focus on those that are more focused on the boring parts of the MLP market as well as looking at some of the reactiveness of these funds’ net asset values to the market, to find … which ones are less reactive, which ones are actually focused on transportation of oil and gas.


Alex Reiss, Stifel

I think that the best opportunity for investors these days is likely in the senior loan asset class. Senior loans are floating rate securities and as LIBOR has risen, the chances that these funds start passing through higher and higher dividends is certainly a factor.   We think that this will attract demand and as such the prices could rise.