Taylor Swift’s Investment Secrets: The Appeal of Closed-End Funds

Taylor Swift’s craze has swept the world, and it is estimated that 60 performances will bring an economic impact of US$5 billion. Although Hong Kong is not part of such a prestigious event, the diva’s investment direction may deserve attention everyone. A fund manager once revealed that Taylor Swift has always invested in “CEF” closed-end funds, with returns reaching 10% or more What is the appeal of this investment tool? Is it suitable for general investors?

Taylor Swift was born into the financial world. Her father Scott Swift is on the left and her mother Andrea Swift is on the right. The photo was taken in 2013. (Rick Diamond/ACMA2013/Getty Images for ACM) (Rick Diamond/ACMA2013 via Getty Images)

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Taylor Swift comes from a financial family

Taylor Swift is good at singing and dancing, and she is also keen to invest. Once Boaz Weinstein, the famous American hedge fund manager and founder of Saba Capital Management, broke the news that the queen of music had invested in a closed end fund (CEF). She even said: “Do you think I’m kidding? This is what Taylor Swift’s father told me!” Taylor Swift seems to come from a financial family. Her father, Scott Swift, inherited his father’s business. He worked as a stockbroker when he was young and joined the United States in 1980. Lin provides financial management consulting services, and his mother Andrea Swift also worked in the fund department of Merrill Lynch. It is not surprising. that Taylor Swift can also take care of personal investments while busy with her acting career.

Closed-end funds, like common stocks, are traded on exchanges. (AP Photo/Richard Drew, File) (ASSOCIATED PRESS)

If you choose CEF, the returns are generally higher

As for Taylor Swift’s CEF closed-end fund, its nature is the same as stocks in that it raises money by issuing shares, but the number of closed-end funds issued is fixed and will no longer accept subscription or redemption on after the issue period If investors If you don’t want to hold it until maturity, you have to buy and sell it on the exchange; and the price of closed-end funds is not linked to its net asset value (NAV) like open-end funds, but floats according to market demand; choose to use closed-end funds to list The industries are usually commodities with low liquidity, such as some rare natural resources or minerals, or investment projects with capital caps, because even if there is more money raised in these industries, it may not it is invested in suitable projects.

As for open-ended funds, they are more common. One of them is the Tracker Fund, which is familiar to Hong Kong people. It does not have a fixed number of issues. Investors can buy and sell according to the net value provided by the issuer during the trading day.

Open versus closed

Investors prefer closed-end funds not only because they are sold at a discount when an IPO is launched, but also because of their attractive returns. Weinstein did not reveal which open-end funds Taylor Swift bought, but according to US media reports, the dividend payout rate of many local closed-end funds can reach more than 8%. Taking Royce Micro-Cap Trust (RMT) as an example, its discount to net asset value is 13%, its 12-month return on equity is 14.78%, and its annual dividend income is around 8%.

How to choose between open-end and closed-end funds? Open-ended funds are more common than closed-end funds. For investors who like lower risks and more predictable prices and returns, this is a stable choice, but the income potential is not as good as closed-end funds; and for those who are willing to take risks, For investors who want more risks in exchange for higher returns, closed-end funds are an ideal choice However, such funds may not have an active secondary market. It is also worth noting that if investors are long-term optimistic or long-term about a certain industry, With a pessimistic attitude, this type of fund can experience a large premium or discount in the long term. If the latter is true, it will be a huge risk. to investors.

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