Advisors And Investors View Widening Discounts As Most Compelling Trend In Closed-End Funds Space, Finds Aberdeen Asset Management Survey

Dec 08, 2015, 10:00 ET from Aberdeen Asset Management Inc.

PHILADELPHIA, Dec. 8, 2015 /PRNewswire/ -- According to a recent study released by Aberdeen Asset Management Inc. (Aberdeen), 78 percent of financial advisors and investors view widening discounts as a compelling trend in the closed-end funds market. The Aberdeen study gauged perceptions and sentiments of more than 100 financial advisors and investors at a recent closed-end funds conference.

The share prices of closed-end funds, or funds that issue a fixed number of shares to investors and trade on an exchange, typically trade at a discount or premium to net asset value (NAV). Recently, concerns regarding global growth and expectations for a Federal Reserve (Fed) interest rate hike have caused the market to trade at the steepest discounts in eight years. Such discounts could offer investors a bonus if the gap between the share price and NAV narrows after investment.

"It's not uncommon for funds to trade at discounts to their net asset value, but nearly all funds in the closed-end sector are currently trading at levels below their long-term averages," said Alan Goodson, Head of Product for Aberdeen in the U.S. "It can be a volatile sector, particularly in emerging and Asian markets where sentiment has been quite negative of late. However, these things tend to be cyclical, and current valuations in both equity and fixed income closed-end funds can represent a tremendous opportunity for the long-term investor looking for capital growth or income."

Advisors and investors presently see the value in closed-end fund discounts. In fact, when asked to articulate the most attractive benefits of closed-end funds, 54 percent of respondents noted their ability to purchase shares at discounts to NAV. This was followed by their ability to deliver long-term stability and income (17 percent), and their actively-managed and flexible structures (16 percent).

When seeking to gain exposure to different markets through closed-end fund vehicles, more than one-third (37 percent) of respondents identified an interest in domestic markets, followed by emerging markets (36 percent), frontier markets (17 percent) and international developed markets (10 percent).

"We believe closed-end funds represent an alternative to invest in emerging markets because their assets can be nimbly deployed to potential opportunities in thinly traded markets," Goodson added.  "Recent headlines have caused emerging markets to go out of favor, causing such closed-end funds to trade at steeper-than-average discounts, but we remain committed to their long-term potential.  We think the fundamentals remain strong, valuations are depressed and emerging markets are now facing a cyclical issue. In our view, it is the most opportune time to take advantage of closed-end fund strategies."

The survey also found that, despite the potential benefits closed-end funds offer to investors, financial advisors experience challenges when speaking about such investment vehicles with clients. Close to half (42 percent) say that the greater volatility in share prices remains a primary challenge to increasing investor demand, combined with lack of knowledge and understanding of the product offering and the potential benefits (34 percent).

Aberdeen has developed several resources, including Why Closed-End Funds Can Trade At A Discount and 10 Reasons to Invest in Closed-End Funds, which are designed to educate investors and help advisors explain the structure and potential advantages of closed-end funds to their clients. Additional investing resources about closed-end funds and Aberdeen's product lineup are available online at:

Editor's Note:

The Closed-End Funds Survey was commissioned by Aberdeen and an independent party. It was conducted on October 27, 2015 at the Pristine Advisers and CEF Network's Fifth Annual Closed-End Fund Investment Strategies Conference in New York. The data is based on responses from 101 financial advisors and investors.

Aberdeen – simply asset management:
Aberdeen is an independent asset management company. Formed out of a management buy-out in Aberdeen, Scotland, in 1983, we are now a FTSE 100 company operating on-the-ground in over 25 countries across Europe, Asia and the Americas.

We are defined by our pure focus on asset management, including equities, fixed income, property and multi-asset portfolios, including a strong and growing alternative investment capability. All our investment solutions are driven by our commitment to straightforward, transparent investment approaches that stress intensive, first-hand research and a long-term view.

As of September 30, 2015, we manage total assets of more than $429 billion on behalf of institutional and private investors.

In the United States, Aberdeen Asset Management (AAM) is the marketing name for the following affiliated, registered investment advisers: Aberdeen Asset Management Inc., Aberdeen Asset Managers Ltd, Aberdeen Asset Management Ltd and Aberdeen Asset Management Asia Ltd, each of which is wholly owned by Aberdeen Asset Management PLC. "Aberdeen" is a U.S. registered service mark of Aberdeen Asset Management PLC.

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SOURCE Aberdeen Asset Management Inc.