of stocks and bonds for 93 cents.
The YieldShares High Income ETF (NYSEARCA:YYY) owns a basket of closed-end funds (CEFs) from firms including Eaton Vance, BlackRock and Nuveen that currently trade at an average discount to net asset value (NAV) of 7%. CEFs are exchange-traded securities, just like ETFs, but are primarily designed to focus on generating high income. In addition because CEFs only issue a static amount of shares, they often trade at a market price that is disconnected from the actual value of the securities held by the fund. Thus when the market price of a CEF trades above its NAV it is deemed to be trading at a “premium” and when the market price trades below NAV it is trading a “discount.”
YYY owns 30 high income CEFs that are trading at “discounts” to NAV. The result is a portfolio with about 60% equity CEFs, 25% bond CEFs and 15% asset allocation CEFs. This produces a portfolio with a low 1.4 year duration, 9.5% distribution and an average CEF discount to NAV of 7%.
YieldShares’ YYY joins two other ETFs of CEFs in the marketplace today, the Powershares CEF Income Composite Portfolio (NYSEARCA:PCEF) and the Market Vectors CEF Municipal ETF (NYSEARCA:XMPT). Together these two ETFs contain about $500 million in assets. To learn more about CEFs check out the infographic below from YieldShares.