We have a new recommendation among closed-end funds — which we refer to as Shadow funds, notes growth and income expert Steve Mauzy, contributing editor to Wyatt Research's Dividend Confidential.

The Cohen & Steers Closed-End Opportunity Fund (FOF) is the new kid on the block. Like all our Shadow Fund recommendations, the Cohen & Steers fund checks all the boxes: high-yield income and exceptional value.

The Cohen & Steers fund's investment strategy is to buy other fund investments, both CEFs and ETFs, that cover a wide swath of investment strategies. The Cohen & Steers fund owns 113 funds in total. Low volatility is the upside to broad diversification. 

Meanwhile, the fund pays $1.04 per share annually. The distributions are paid monthly at $0.087 per share. The distributions the fund pays generates a generous 8.4% yield on investment.

Price relative to value is another eye-catcher. We pay close attention to relative discounts and relative premiums, particularly relative discounts. If the relative discount is greater than the historical average discount, a buy opportunity could be emerging. If the relative discount exceeds the historical average by a wide margin, a buy opportunity has likely emerged. 

Cohen & Steers shares are priced at 4.3% discount to NAV. That might seem insignificant compared to our other recommendations, a few of which have traded with discounts as high as 20% to 30%. Keep in mind, it’s all relative. Relatively speaking, the discount is significant. The margin is wide. 

Cohen & Steers shares have traded as high as a 6.4% premium to NAV. The average is a 1% premium for the year. The 4.3% discount is big relative to the premium that has existed in recent history.


Sticking with the theme of relative value, Cohen & Steers z-score further buttresses our recommendation. The z-score is a statistical measure of value. It tells you the value today compared to historical value. The higher the z-score, the less appealing the value proposition. Here, we seek the negative. The more negative the z-score, the more positive the value proposition.

Our interest is piqued when we cross paths with a closed-end fund that sports a z-score of -2 or greater. Cohen & Steers one-year z-score is exceptionally negative. The three-year average is negative 1.4. (Again, the more negative the z-score, the better.) The Cohen & Steers fund is exceptionally priced for value today.

History has shown that buying when everyone is selling is frequently the best time to buy and profit from a closed-end fund. The returns on our open Shadow Fund recommendations support my assertion. I expect the Cohen & Steers Closed-End Opportunity Fund to adhere to form.

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