Closed-End Fund Advisors' Portfolio Models

International Opportunities

This model (formerly called "International Equity" and "International REITs") provides risk-tolerant investors a diversified portfolio in order to invest in equity funds with little-to-no U.S. equity exposure. The primary objective is to seek long-term growth on average 2%+ over the Dow Jones World (excluding U.S.) index. Bond exposure is limited to no more than 20%.

Allocation: Primarily equity oriented funds with little U.S. exposure and an estimated yield of 3%+.

Globally Diversified Growth

This well-diversified model is designed for growth-oriented investors who seek the opportunity for growth in excess of the S&P 500 and Dow Jones World (excluding U.S.) indices on a consistent long-term basis.

Allocation: 84% equity, 16% bond, a tactical and wide mandate with an estimated yield of 3%-4%+.

Business Development Company ("BDC")

This is a tactical portfolio focusing on the debt-based BDC sector. We expect to hold 6-9 BDCs in the portfolio at any given time. A portion of the assets may be kept in cash, seeking a favorable entry point into the BDC sector in an event-driven fashion. We seek to blend our expertise in manager or NAV total return performance with good market pricing vs. historical averages and the current peer environment. We also pay particular attention to BDCs with focus on sustainable income and special dividend yield for investors.

Allocation: Diversified selection of BDCs seeking consistent income and positive growth of principal, while exploiting the increased inefficiencies from a group of funds that trade 5x their liquidity and 20%+ more yield than traditional taxable CEFs. There may be liquid venture debt exposure.

Hybrid Income

This model provides high current income with roughly half of the funds based on equity income strategies and half based on fixed income strategies. Funds that pay monthly dividends, have a positive NAV trend and have high dividend confidence are preferred. Under normal market conditions, the average asset-weighted portfolio leverage is maintained around 20%. This model seeks a distribution yield 2% greater than the ML High Yield 100 as the primary objective with the preservation of capital a secondary objective.

Allocation: A 70/30 split of above-normal equity and bond income, estimated yield of 8.5%+.

Growth and Income

This well-diversified portfolio model is designed to give an equity-oriented experience that pays significant attention to the distribution yield of a fund when screening and selecting it for inclusion into this model. The primary objective is long-term growth and modest income generation. It seeks to produce returns higher than the S&P 500 and Dow Jones World (excluding U.S.) on a long-term basis.

Allocation: 72% equity, 26% bond, a tactical and wide mandate with an estimated yield of 5%+.

Foundation/Balanced

The goal of this model is active management similar to the way foundations manage their assets. There is a focus on good earnings coverage and UNII levels for bond funds and when possible, unleveraged funds. The goal is to provide returns on average 2% a year higher than a 60% S&P 500/40% Barclays Bond index while paying particular attention to protecting the account’s principal. This model has significant exposure to both equity- and fixed income-oriented funds as well as limited exposure to hedging or absolute return funds.

Allocation: A 66/34 balance of equity and bond funds with an estimated yield of 5%-6.75%.

Conservative Diversified

This model is designed for our most conservative investor who still desires the opportunity to modestly grow their portfolio over time. Preservation of capital is the primary objective of this model with low income yield a secondary objective. This model seeks an average annualized 6% return per year and is best suited for a Defined Benefit Plan's investment objective.

Allocation: Primarily CEF-based with a 40/20 balance of equity and bond funds. Exposure to non-traditional equity/bond ETFs and OEFs (34%) to reduce portfolio volatility.

Managed Municipal Bond Closed-End Funds

This actively managed municipal bond portfolio is comprised of 8-12 muncipal closed-end funds gaining exposure to top managers and seeking high tax-equivalent yield for high income investors. CEFA's research and management expertise seeks to help reduce the risk of dividend cuts, manage duration and credit risk, and attempt to maximize the underlying performance of the municipal bond exposure.

Allocation: An actively managed municipal bond portfolio comprising of both National and State Muni funds. Constantly monitoring for diversified, high quality, blended tax-free yield while seeking to protect principal.

Special Opportunities

This model is designed for investors who are not in need of asset allocation or a diversified income stream but want to access the CEFA's focused expertise in closed-end fund data, alerts and research.

Allocation: Designed to be a focused portfolio of 3-6 closed-end funds at any given time, it will contain positions based on three main investment themes: (1) event-driven investing, (2) pre-activist/activist following and (3) strong fundamental buys. The portfolio can be 0% or 100% of each category and has a very wide and open mandate. This model can be 100% for a prolonged period of time and has a goal of absolute return as a primary guideline vs. relative returns. The volatility and individual fund risk is expected to be greater than our other portfolio models.

Diversified Tax-Sensitive Income

This is a diversified portfolio focused on three of the largest CEF sectors that are known for producing tax-free or tax-sensitive dividends to investors. The primary goal is a diversified portfolio for high tax individual as well as to diversify the duration risk associated with most municipal bond CEFs. Duration risk is the risk of the bond's price falling when interest rates increase from current levels.

This sectors include Municipal Bond funds, Covered Call equity funds and the Master Limited Partnership (MLP) funds. From our research and CEFdata.com data, these sectors have a 10 year NAV correlation to each other ranging from 38% for Municipal Bond and MLP funds, 34% for Municipal Bond and Covered Call equity funds and 73% for MLP and Covered Call funds. Low correlation show that based on past prices movements, the sectors generally move in different directions to each other, which can help diversify the risk of a portfolio securities all going the same general direction in positive and negative return environments.

Allocation: The portfolio will have allocation of Municipal Bond exposure from 30% to 50% and 20% to 40% allocated to Covered Call and MLP exposure depending on the client risk profile and market conditions. We are seeking a tax-adjusted income rate of 6.5% to 7.5% and have the ability to show current tax-adjusted income levels for investors in any tax-bracket on a daily basis which is powered by each funds 12 month rolling dividend classification notices and current fund dividend policies. These dividend levels and characteristics can change over time, but in our experience, it is the best way to understand the after-tax yield for a portfolio.

CEFA Composite Performance (Net)*
As of July 31, 2016
Investment Portfolio Model QTD YTD 1 Year 3 Year 5 Year 10 Year Since Inception Inception Date
Conservative Diversified 2.74% 9.81% 1.20% 2.49% 3.65% N/A 5.63% 5/1/2009
Foundation/Balanced 3.05% 8.64% 0.50% 3.56% 4.94% N/A 6.88% 9/1/2009
Global Growth & Income 3.13% 8.28% -2.61% 1.90% 3.34% 2.06% 3.86% 1/31/1999
Globally Diversified Growth 3.75% 5.88% 4.40% 4.52% 5.13% 3.89% 5.63% 1/31/1999
Hybrid Income 4.10% 10.27% 2.19% 5.43% 8.12% N/A 4.93% 12/1/2006
International Equity 4.19% 4.25% -6.73% 0.47% 1.53% 2.42% 8.25% 11/1/2002
Business Development Companies 6.39% 10.98% 5.24% N/A N/A N/A 4.48% 1/1/2015
Managed Municipal Bond CEFs 0.23% 9.63% 16.93% N/A N/A N/A 11.82% 8/1/2014
Special Opportunities 3.74% 14.67% 11.70% 11.24% N/A N/A 9.07% 6/1/2013
Benchmarks QTD YTD 1 Year 3 Year 5 Year 10 Year Since Inception Inception Date
S&P 500
Total Return
3.69% 7.66% 5.61% 11.15% 13.37% 7.75% 5.26% 1/31/1999
Barclays Capital Global Aggregate Bond 0.75% 9.78% 9.45% 2.63% 1.50% 4.37% 4.46% 1/31/1999
MSCI World (Ex-US) 4.92% 1.79% -6.89% 1.75% 2.55% 2.02% 7.31% 11/1/2002
Barclays Municipal Bond 0.06% 4.40% 6.94% N/A N/A N/A 5.24% 8/1/2014
Thomson Taxable Fixed Inc CEF TR 1.92% 8.49% 6.79% 3.38% 4.21% 5.40 4.83% 12/1/2006
Thomson All Equity CEF TR 3.22% 7.76% 0.33% 2.16% 2.97% 4.34% 3.28% 12/1/2006
Wells Fargo BDC TR 5.71% 14.98% 10.84% N/A N/A N/A 5.96% 1/1/2015
60/40 S&P 500/Barclays Bond 2.51% 8.51% 7.15% 7.74% 8.62% 6.40% 4.94% 1/31/1999
Growth of $1,000,000 Invested CEFA's Globally Diversified Growth model on January 31, 1999*
Globally Diversified Growth $2,610,225
S&P 500 Total Return $2,454,562
Barclays Capital Global Agg Bond Total Return $2,147,426
60/40 S&P 500/Barclays Bond $2,327,041

Interested? Contact us today for more information and our brochure!

Direct: 804-288-2482
Toll-free: 1-800-356-3508 (U.S. and Canada)
E-mail: sales@CEFadvisors.com

*Disclosures: The net returns presented above for all of CEFA's composites were calculated on a time-weighted return basis. All dividends, interest and income, realized and unrealized gains and losses, brokerage and custodial fees are fully reflected. CEFA advisory fees are fully detailed in its ADV Part 2. CEFA composites include all actual fee-paying and non-fee-paying, fully discretionary accounts in this investment strategy that have been under CEFA management for at least three months.

Diversified Growth and Growth & Income Models: As of December 31, 2014, the percentage of non-fee-paying CEFA accounts in the Growth strategy was 11% and was 0% in the Growth & Income strategy. The inception date of this composite is December 31, 1998. As of January 1, 2014, these accounts are managed solely by John Cole Scott; he and CEFA founder, George Cole Scott, jointly managed the accounts from June 30, 2009 to December 31, 2013; and George Cole Scott solely managed the accounts from their inception to June 30, 2009.

Hybrid Income Model: As of December 31, 2014, the percentage of non-fee-paying CEFA accounts in this strategy was 0%. John Cole Scott has managed the accounts in this model since its inception on November 30, 2006.

International Opportunity: As of December 31, 2014, the percentage of non-fee-paying CEFA accounts in this strategy was 0%. The inception date of the International Equity composite (formerly called International Equity and International REIT) is October 31, 2002. As of January 1, 2014, these accounts are managed solely by John Cole Scott; he and CEFA founder, George Cole Scott, jointly managed the accounts from December 31, 2010 to December 31, 2014; and George Cole Scott solely managed the accounts from its inception to December 31, 2010.

Foundation Balanced, Conservative Diversified and Special Opportunities: As of December 31, 2014, the percentage of non-fee-payment CEFA accounts in this strategy is 0%. John Cole Scott has managed the accounts in these models since their inception: August 31, 2009, April 30, 2009 and May 31, 2013, respectively.

Managed Municipal Bond Closed-End Funds: As of December 31, 2014, the percentage of non-fee-paying CEFA accounts in this strategy is 0%. John Cole Scott has managed the accounts in this model since its inception on July 31, 2014.

Business Development Company ("BDC"): As of December 31, 2014, the percentage of non-fee-paying CEFA accounts in this strategy is 0%. John Cole Scott has managed the accounts in this model since its inception on December 31, 2014.

The results for individual accounts at different periods may vary. Investors should not rely on prior performance as a reliable indication of future results. These figures are unaudited and may be subject to change. The information provided should not be considered as a recommendation to buy or sell any particular security outside of a managed account. CEFA reserves the right to modify its current investment strategies and techniques based on changing market conditions or client needs. The S&P 500 and DJ World Stock (excluding U.S.) indices were calculated using total return analysis with dividends reinvested. These indexes have not been selected to represent an appropriate benchmark to compare an client's performance but rather is disclosed to allow for comparison of the client's performance to that of a certain well-known and widely recognized index.

Sign up for CEFA's
Email Notifications

Enter your e-mail address below

Be sure to tell friends, family, colleagues and your financial advisor about this free and valuable investment newsletter.

CEFA Portfolio Models