The Contrarian Investor Podcast
Opportunities in Closed-End Municipal Bond Funds: Jonathan Browne, RiverNorth Capital
Nov 21, 2024
Jonathan Browne, a portfolio manager at RiverNorth Capital specializing in closed-end municipal bond funds, shares his insights on investment opportunities in this niche market. He sheds light on the unique structure of closed-end funds compared to mutual funds and ETFs. Browne discusses expected yields and how discounts to net asset value present a contrarian investment strategy. He also addresses the risks posed by rising interest rates and inflation, while emphasizing how the current environment could favor savvy investors.
40:44
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Quick takeaways
- Closed-end municipal bond funds trade at discounts to their net asset value, presenting unique investment opportunities for savvy investors.
- Investing in these funds aligns with contrarian strategies, as significantly widened discounts often indicate favorable entry points during negative market sentiment.
Deep dives
Understanding Closed-End Funds
Closed-end funds are registered investment companies that offer a unique structure compared to open-ended mutual funds and ETFs. They are created through an initial public offering (IPO) and have a fixed number of shares that trade on secondary markets, which distinguishes them from funds that allow continual trading based on daily inflows and outflows. Closed-end funds often utilize leverage to enhance yield, making them attractive for retail investors seeking above-average income. Notably, while their shares can trade at a discount to their net asset value (NAV), this discrepancy presents potential investment opportunities as the market price may not reflect the true value of the underlying assets.
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