This Multi-Manager Approach & Double Digit Yield Are An Ideal Combination
And The Award Goes To...
Every week, we’ll profile a high yield investment fund that typically offers an annualized distribution of 6-10% or more. With the S&P 500 yielding less than 2%, many investors find it difficult to achieve the portfolio income necessary to meet their needs and goals. This report is designed to help address those concerns.
If you were to hand out the title of “most popular closed-end fund”, the Liberty All-Star Growth Fund (USA) might be the winner. It’s one of the largest CEFs in the marketplace by AUM. It’s got a fairly good long-term track record. It sports a healthy double-digit yield. Its portfolio is full of the most well-known companies in the world. It checks most of the boxes that investors are looking for. But for a portfolio that, stylistically, looks similar to that of the S&P 500, it begs an obvious question - does the fund add value for what you’re paying for or are you simply better off buying the index cheaply and being done with it?
Most CEF investors are in it for the double-digit distributions, so in that sense they’re likely pleased with USA. From a total return perspective, however, the decision becomes more complicated. Is USA still benefiting from its reputation as an industry heavyweight or is it really doing the job for shareholders?
Fund Background
USA’s investment objective is to seek total investment return, consisting of long-term capital appreciation and current income. The fund uses a multi-manager approach that divides roughly 20% of the fund’s assets across each of five investment managers operating independently according to their own style. Three are value managers and two are growth managers, giving it an overall large-cap core exposure.
The “fund of funds” strategy has its pluses and minuses. On one hand, it’s nice that investors have access to multiple portfolio managers using multiple styles all in one nice, neat little package. On the other hand, these funds can also layer fees on top of fees with little value added to show for it. In the closed-end fund world, that can be a big problem since many of these products have high fees to begin with. USA, however, is the exception to the rule. Its 0.93% total expense ratio is not only reasonable within the CEF universe, it’s even better for a fund of funds. Overall, I really like the style and cost of this fund.
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