Closed-end funds have nosed-out exchange-traded funds as the choice of sophisticated investors, mainly because of the “income stream” they provide, according to survey by Nuveen Investments. The study, conducted in January by KRC Research, found that about 33% of high net-worth investors were familiar with the closed-enders compared with 25% for ETFs. When asked to rank their top reasons for preferring closed-end funds, 30% of respondents chose income stream as important, followed by “easy access to illiquid asset classes and institutional portfolio strategies (25%). As for the attractive features of closed end funds, 79% ranked the fact that they are actively managed, followed by income stream (72%) and diversification (71%)
The survey also found the more investable assets a respondent had, the more familiar they were with closed-end funds, and few people felt comfortable explaining the various instruments, though 15% could tackle closed end funds, while only 9% could do the same for ETFs.