Global Equity CEFs Are Hot – Should You Buy?

The hot hand in the closed-end fund marketplace this year are global equity funds. These diversified portfolios own a mix of U.S. and international stocks with the added boost of embedded leverage. Some also employ options or other derivative strategies to generate a portion of the abundant income that is distributed to shareholders.

Some of the biggest and most successful equity CEFs this year include:

Alpine Global Dynamic Dividend Fund (AGD) +18% YTD

Calamos Global Dynamic Income Fund (CHW) +22% YTD

Calamos Global Total Return Fund (CGO) +20% YTD

Clough Global Opportunities Fund (GLO) +23% YTD

Eaton Vance Tax-Advantaged Global Dividend Income Fund (ETG) +22% YTD

*Performance data year-to-date courtesy of stockcharts.com and includes dividends.

For comparison purposes, the iShares MSCI ACWI ETF (ACWI) is up 8.59% since the start of 2017. ACWI stands for “all-country world index”, which measures a broad swath of the global equity landscape through a traditional market-cap weighted structure.

The out performance of this group has been driven by a host of factors including:

Strong gains across international markets with an emphasis on emerging economies and European stock market momentum.

Robust buying activity leading to narrow discounts relative to historical averages across the entire category since the post-election rally began.

Attractive yields in an asset class that eschews the traditional sensitivity to interest rates that haunts bonds, REITs, and other defensive groups.

Put simply, these funds are in the right place at the right time to benefit from the technical strength of international stock exposure and the sentiment of income investor risk appetites.

One of the stars of this rally has been GLO, which owns a multi-asset mix of securities. Most this fund’s underlying investments are U.S.-based stock holdings. However, it does contain a healthy mix of foreign exposure as well. The chart below shows how strong the momentum has been with GLO since the November bottom.