Calamos CEF Income & Arbitrage ETF

CCEF

Market cap $20M

In March, VettaFi held its annual Exchange Conference, bringing together experts and asset managers from across the globe. With economic uncertainty top of mind, many attendees were eager to learn about alternative strategies they can put to work in unsettled markets.

All this market uncertainty helps highlight one particularly important fact of asset management: It pays to have a diversified portfolio. Currently, many of 2024's tried-and-true growth strategies are struggling to regain their footing.

On this week's episode of “ETF of the Week,” Chuck Jaffe of “Money Life” discussed the Invesco CEF Income Composite ETF (PCEF) with Roxanna Islam, head of sector and industry research at VettaFi. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF overall.

Closed-end funds offer unique opportunities due to their discount/premium mechanisms, allowing share prices to deviate from net asset value per share in a wild manner. In general, CEFs often provide diverse exposure across equity and fixed-income portfolios, and they even offer exposure to hybrid portfolios, but also allowing for sector-specific exposure. One important note is that not all premiums or discounts indicate a buying or selling opportunity; instead, it can make more sense to examine relative value over historical periods.

For investors looking to foster more income in their portfolios, closed-end fund (CEF) ETFs can be a strong option. Unlike open-end funds, closed-end funds won't need to repurchase shares from investors.

Calamos CEF Income & Arbitrage ETF offers high monthly income by investing in a diversified portfolio of income-producing closed-end funds. This fund-of-funds approach provides significant diversification in one investment, as the exposure ends up being spread across a diverse group of different assets and sectors. The ETF has a higher total expense ratio, primarily driven by the underlying CEF expenses; still, they've been able to deliver some solid results.

While many facets of fixed income have performed well recently, some headwinds are causing investor trepidation. One such headwind is relatively tight credit spreads.

Times are interesting to say the least as we converge on a period in which the Federal Reserve cuts interest rates just as we come up against a national election that may be close or contested in many races, including the US presidency.

Along with regular distributions, closed-end funds (CEFS) may offer investors many attractive benefits. For example, adept CEF managers may provide potential returns through leverage.

For investors seeking to maximize portfolio efficiency, choosing the right assets for the job is essential. And this is a decision point where a quality, focused ETF strategy can help.