The 259 taxable CEF sector issued approximately
Leverage management remains a prudent responsibility by fund advisers. Although leverage can benefit CEF investors by increasing total returns and dividend payout ratios, performance is not the only consideration. Managers must also keep in mind continued access to capital markets, diversification of borrowing sources, and the cost of leverage over the long term especially now with rates being at historical lows.
Over the last year, CEF managers remained active by issuing new leverage security types, attracting new lenders, and fixing their leverage costs by issuing term notes and preferred stock. A particular leverage sector increasing in importance is the private placement market for raising debt capital. Over the past year as costs decreased, issuance by taxable CEFs in this market hit record highs. Fitch expects this trend to continue, including sectors other than MLP funds.
In the municipal space, funds have refinanced a large portion of their publicly traded preferred stock into private securities placed directly with banks. Municipal funds are also focusing on solutions to tender option bond leverage that is being impacted by Volcker and Risk Retention Rules of the Dodd Frank.
Fitch rates approximately
Additional information is available at 'www.fitchratings.com'.
Source: Fitch Ratings
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