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An All-Star Closed-End Fund with a Double-Digit Yield

Investors Alley
An All-Star Closed-End Fund with a Double-Digit Yield
A good hunting ground for double-digit yields is the world of closed end funds (CEFs),…

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Investors Alley
An All-Star Closed-End Fund with a Double-Digit Yield

A good hunting ground for double-digit yields is the world of closed end funds (CEFs), as my colleague Tim Melvin often points out.

For those of you who are unfamiliar, CEFs are a type of fund that issues a fixed number of shares through a single initial public offering (IPO) to raise capital for its initial investments. Its shares can then be bought and sold on a stock exchange, but no new shares will be created and no new money will flow into the fund.

That means the shares can trade at a premium or discount to the net asset value – meaning you can buy a fund that owns great stocks for less money than the shares you get to control are worth.

Let me show you a great opportunity in this space…

A very popular CEF is the Liberty All-Star Equity Fund (USA). Its investment objective is to seek total investment return, consisting of long-term capital appreciation and current income. Since its inception in 1986, USA has delivered a 2,440% total return.

Multi-Manager Approach

What I like most about this fund is that it uses a multi-manager strategy—without the use of any leverage.

USA allocates its portfolio assets on an approximately equal basis among several independent investment managers (currently five of them), all with different investment styles, recommended and monitored by USA’s investment advisor, ALPS Advisors, Inc.

There are three value managers—Aristotle Capital Management, Fiduciary Management, and Pzena Investment Management—along with two growth managers, Sustainable Growth Advisors and TCW Investment Management.

So, you have access to five portfolio managers using different styles in one package. USA’s 0.93% total expense ratio is not only reasonable within the CEF universe, it’s fantastic for a fund of funds.

The fund’s portfolio clearly reflects the various investing styles coming together under a single umbrella and is quite diversified. The value part is quite evident in the 21.2% allocation to financials, and the growth part shows up in the 21.4% allocation to the technology sector.

Here are the other sector allocation percentages:

  • Healthcare: 14.2%
  • Consumer discretionary: 13%
  • Industrials: 8%
  • Communication services: 5.9%
  • Materials: 5.8%
  • Consumer staples: 4.6%
  • Energy: 2.6%
  • Real estate: 1.9%
  • Utilities: 1.4%

Not surprisingly, the top four stocks are members of the Magnificent Seven: Microsoft (3.4%), Nvidia (2.5%), Amazon (2.5%), and Alphabet (2.3%).

A Closer Look

Historically, the fund has had some big fluctuations in its trading price relative to its underlying net asset value. In the last 10 years, USA has traded at more than a 20% discount and more than a 15% premium, so investors should brace themselves for some potentially wild short-term volatility. It currently trades at nearly a 3% discount,

Liberty All-Star Equity Fund’s payout policy is to pay distributions on its shares totaling approximately 10% of its net asset value per year, payable in four quarterly installments of 2.5% of the fund’s net asset value at the close of trading on the Friday prior to each quarterly declaration date.

These fixed distributions are not related to the amount of the USA’s net investment income or net realized capital gains or losses, and may be taxed as ordinary income up to the amount of the fund’s current and accumulated earnings and profits. If the total distributions made under the distribution policy exceed its net investment income and net realized capital gains, the excess will generally be treated as a non-taxable return of capital, reducing the shareholder’s adjusted basis in his or her shares.

Distributions that involve paying out a percentage of assets regularly have predictability as a key advantage. Shareholders should never be surprised by a distribution increase or decrease because of its payout policy.

As the share price rises, so does the distribution, and vice-versa. A look at USA’s distribution history shows that the quarterly distribution took a big hit during the 2008-09 global financial crisis, but it’s been rising mostly ever since, even during the pandemic recession. However, the distribution did fall during the 2022 bear market for both stocks and bonds.

Currently, USA has a yield of 10.27%. The fund’s price is up 6.26% over the past year and 2.41% year-to-date.

While there have been ups and downs, as there are with any fund that’s been around for 37 years, the fund’s long-term track record has been pretty good. The diversified approach and balance between value and growth strategies are unlikely to ever produce market-leading returns, but it should help to smooth out volatility in the pursuit of building wealth over the long-term.

USA is a buy under $6 per share.

For more CEF opportunities at a discount, check you Tim Melvin’s CEF newsletter below.

Only 3% of investors even know these funds exist

But using them, I can beat the market 2-to-1 while collecting 2-10X MORE yield from regular dividend stocks.

I learned this trick while I was rubbing elbows with some of the biggest fund managers in US history.

They too are buying these little known funds, cashing in huge discounts and collecting income while they do it.

Click here to learn the secret yourself.

 

An All-Star Closed-End Fund with a Double-Digit Yield
Tony Daltorio

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Unfazed Bitcoin breaks $30,000 mark, causing market liquidations

Quick Take As Bitcoin confidently surged past the $29,000 mark earlier today, the crypto market witnessed a flurry of liquidations close to $100 million…

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October 20, 2023

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Quick Take

As Bitcoin confidently surged past the $29,000 mark earlier today, the crypto market witnessed a flurry of liquidations close to $100 million in the past 24 hours. The majority of this sum, around $72 million, was induced by short positions, of which Bitcoin constituted approximately $40 million. This movement signals the market’s reaction to Bitcoin’s price hike, leading to a quick closure of positions that bet against the digital currency’s rise.

Liquidations past 24 hours: (Source: Coinglass)

Simultaneously, an uptick in open interest is observable. Data from Coinglass reveals an estimated 430,000 Bitcoin currently tied up in futures open interest contracts. This is one of the highest levels since August, showcasing a growing interest from traders in the futures market.

Open Interest: (Source: Coinglass)
Open Interest: (Source: Coinglass)

Since the closure of the U.S. stock market, the price of Bitcoin has witnessed an increase of over 3.5%. In contrast, the S&P 500 futures market is currently experiencing a dip, showing a decline of 0.27%.

BTC vs SPX: (Source: Trading View)
BTC vs SPX: (Source: Trading View)

The post Unfazed Bitcoin breaks $30,000 mark, causing market liquidations appeared first on CryptoSlate.

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Central Bank of Argentina to introduce ‘digital peso’ bill ‘as soon as possible’

The BCRA has accelerated its work on legislation to implement the CBDC workflow in the country.
After a series of remarks about the…

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October 20, 2023

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The BCRA has accelerated its work on legislation to implement the CBDC workflow in the country.

After a series of remarks about the potential benefits of central bank digital currency (CBDC) for the national economy, the Central Bank of Argentina said it has accelerated its work on the legislation to implement the CBDC workflow in the country. 

On Oct. 18, during a public discussion on the Filo News channel, Argentina Central Bank director Juan Agustín D’Attellis Noguera revealed that the BCRA is working on the legislative framework for the “digital peso,” a CBDC project, recently proposed by the Minister of Economy and presidential candidate Sergio Massa.

Related: Latin America takes global lead in preference for centralized exchanges: Report

According to D’Attellis, the project will be presented “as soon as possible” and then introduced to the national Congress. The official hailed Massa’s approach to CBDC and implicitly criticized the position of another presidential candidate, Bitcoin-friendly Javier Milei, who has been publicly proclaiming the “dollarization” of the Argentine economy.

It is not the first time D’Attellis has stepped in to defend the idea of CBDC. In early October, he expressed his belief that the “digital peso” could help stabilize the Argentine economy as soon as 2024. In the official’s opinion, the key feature of the CBDC is its traceability, which would allow the government to collect taxes.

On Oct. 2, Massa committed to introduce a digital peso should he win the election, aiming to address Argentina's enduring inflation issue. As per the latest election polls, Massa is marginally behind Javier Milei, who advocates for adopting the U.S. dollar as Argentina's official currency while opposing the central bank's role.

Magazine: The Truth Behind Cuba’s Bitcoin Revolution: An on-the-ground report

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Community reacts to SEC dropping XRP case and LBRY shutdown

While celebrating a new court win in Ripple’s legal battle with the SEC, the community mourns the demise of LBRY, which some say was “regulated to…

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October 20, 2023

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While celebrating a new court win in Ripple’s legal battle with the SEC, the community mourns the demise of LBRY, which some say was “regulated to oblivion.”

Ripple’s new win in the legal battle against the United States securities regulators has been marred for crypto enthusiasts by news of the blockchain platform LBRY shutting down operations, which has triggered the community to react.

The U.S. Securities and Exchange Commission (SEC) announced its intention to dismiss all claims against Ripple CEO Brad Garlinghouse and executive chair Chris Larsen on Oct. 19. The event marked a significant legal win for Ripple in the civil case filed by the SEC in late 2020.

On the same day, LBRY, a major blockchain file-sharing and payment network, announced the termination of its operations, citing “several million dollars” in debts owed to the SEC, its legal team and a private debtor. LBRY’s creators are known for building Odysee, an open-source video-sharing website that uses the network, aiming to bring a decentralized alternative to major video platforms like YouTube.

The SEC filed a lawsuit against LBRY in March 2021, accusing the firm of similar securities law violations to those it brought against Ripple. Even after the SEC downgraded the $22 million penalty against LBRY to around $111,000, the firm eventually decided not to continue its appeal against the SEC.

“Whilst we celebrate another massive win for Ripple, let's not forget the damage the SEC has already done to crypto,” prominent XRP influencer, Ashley Prosper, wrote on X (formerly Twitter) on Oct. 19. The crypto enthusiast expressed hope that the LBRY app and its eponymous native token would rise again due to the “rampant censorship on X and the ever-present censorship on YouTube.”

“As we celebrate today's XRP ruling, a less successful outcome by a blockchain sued by the SEC went under the radar,” blockchain enthusiast Slorg noted in a thread on X. The poster said it is unfortunate that what was “once a successful Web3 startup with actual user adoption” is now defunct and non-existent. “Regulated into oblivion,” Slorg wrote.

Some social media commenters pointed out a significant difference between Ripple and LBRY in terms of their capital. XRP is the fifth-largest cryptocurrency by market capitalization, valued at $27 billion, while the LBRY credits’ market cap amounts to just about $5.5 million at the time of writing, according to data from CoinMarketCap.

“Ripple would have been LBRY if they didn’t have the funds to fight the SEC,” one X commenter wrote, arguing that the cases’ outcomes make a stark illustration of the way “rich establishments can use the courts to their advantage until they have to battle the big whales.”

According to pro-XRP lawyer John Deaton, the LBRY case highlights the consequences of the industry overreach by the SEC. Deaton criticized the SEC for picking on a small American company, which wasn’t proven to have committed any fraud, but failing to prevent major failures like FTX.

“After millions of dollars were wasted, the SEC got a $130K fine. This case alone proves the SEC is a broken, failed and inept agency,” Deaton stated.

Despite Ripple executives scoring a major legal win, its litigation with the SEC is far from being over, according to some industry observers.

Related: Crypto Twitter Hall of Flame: Pro-XRP lawyer John Deaton ‘10x more into BTC, 4x more into ETH

“Expect to see some more litigation in the penalty phase between the two parties in regards to the appropriate penalty for Ripple‘s $700M+ of institutional sales,” Fox News journalist Eleanor Terrett said on X, citing lawyers focused on the XRP case. According to Terrett’s sources, Ripple should expect a big fight as the SEC will still want a substantial amount for bragging rights.

In the Oct. 19 filing, the SEC mentioned that the SEC and Ripple will confer with respect to its Section 5 violations regarding its institutional sales of XRP. The regulator requested to propose a schedule for further litigation until Nov. 9, 2023.

Magazine: Crypto Twitter Hall of Flame: Pro-XRP lawyer John Deaton ‘10x more into BTC, 4x more into ETH

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