Lack of Research Limits Advisor Use of Closed End Funds
April 27 2011 - 11:00AM
Business Wire
Financial advisors cite that lack of research coverage and poor
information limits their use of closed-end funds. The results were
found by a study conducted on behalf of Aberdeen Asset Management
Inc. (“Aberdeen”) by Harris Interactive. The online survey
conducted last month polled more than 800 financial advisors across
wirehouses, regional brokerage firms, independent wealth management
shops and other investment advice providers.
Despite the hindrances, nearly all financial advisors (99%) who
recommend closed-end funds report these investment vehicles are
suitable for a broad array of client portfolios, particularly for
individual retirement accounts (89%), post-retiree income
generating purposes (80%) and general savings or investment
accounts (80%).
Advisors are hungry for information
“The most illuminating result of the closed-end fund survey is
that more than 75% of financial advisors are hungry for additional
research coverage and/or increased communications from sponsoring
asset management firms and other parties,” says Gary Marshall, Head
of the Americas at Aberdeen. “These findings are crucial as we
continue to expand our closed-end fund communications, portfolio
manager webcasts, investment roundtables, fund manager commentaries
and educational reports designed to demonstrate the significant
benefits of investing in these important investment vehicles."
Significant results of the advisor survey include:
- 67% of advisors polled who recommend
closed-end funds say that they would like to receive more
information on closed-end funds
- 61% state that expanded research
coverage of closed-end funds would increase their
recommendations
- 44% of advisors who recommend
closed-end funds surveyed feel that the information they receive is
inadequate
- 62% cite that third-party research
rating occasionally influence their recommendations
- 53% who do not recommend closed-end
funds do not do so because they feel there is a lack of research on
or knowledge about closed-end funds
- 24% who recommend closed-end funds have
more than $100 million in assets under management
“Closed-end funds, one of the oldest types of investment
vehicles, offer a unique set of opportunities for investors.1 Their
stable asset base and the ability to remain 100% invested—rather
than account for daily redemptions and withdrawals—make closed-end
funds particularly valuable for investors seeking recurring income
and an actively-managed approach to global and emerging market
investments,” concluded Marshall.
To listen to a webcast of the Aberdeen Closed-End Fund Survey,
please visit:
http://mediazone.brighttalk.com/comm/Aberdeen/2324ed6c80-24616-3324-26400
About the Aberdeen Closed-end Fund Survey
This survey was conducted online within the United States by
Harris Interactive on behalf of Aberdeen Asset Management Inc.
between March 15, 2011 and March 22, 2011 among 805 investment
professionals. Potential respondents were targeted in Harris
Interactive’s Financial Intermediary Panel and are representative
of all advisors and brokers employed at U.S. national wirehouses,
regional brokerages, independent insurance and bank broker-dealer
firms, and registered investment advisory firms. Respondents met
the following criteria: All U.S. residents, age 21 or older, who
are producing financial advisors, selling or recommending
investments to investors for a fee or commission. No estimates of
theoretical sampling error can be calculated; a full methodology is
available.
About Aberdeen Asset Management Inc.
Aberdeen Asset Management PLC (“Aberdeen PLC”), parent of
Aberdeen Asset Management Inc., was founded in 1983 and has over
$287 billion of assets for both institutions and private
individuals as of December 31, 2010. We have 1,800 employees,
located across 30 offices in 23 countries. Our firm is recognized
for its global and emerging markets focus with investment
professionals located in the regions and markets in which they
specialize.
The Aberdeen Advisers are one of the world’s largest asset
managers of emerging market closed-end funds and investment trusts
by value and number.2 Aberdeen Asset Management, defined below,
directly manages eight NYSE Amex-listed closed-end funds including
our largest U.S. listed fund, Aberdeen Asia-Pacific Income Fund
(NYSE Amex: FAX ) along with Aberdeen Israel Fund (AMEX NYSE: ISL
), Aberdeen Emerging Markets Telecommunications Fund (NYSE Amex:
ETF ), Aberdeen Indonesia Fund (NYSE Amex: IF ), Aberdeen Chile
Fund (NYSE Amex: CH ), Aberdeen Global Income Fund (AMEX NYSE: FCO
), Aberdeen Australia Equity Fund (NYSE Amex: IAF ) and Aberdeen
Latin America Equity Fund (NYSE Amex: LAQ). Aberdeen serves as
investment sub-adviser to two other closed end funds managed by
First Trust Advisors L.P.
Aberdeen Asset Management is the marketing name in the U.S. for
the following affiliated, registered investment advisers: Aberdeen
Asset Management Inc., Aberdeen Asset Management Investment
Services Ltd., Aberdeen Asset Management Ltd. and Aberdeen Asset
Management Asia Ltd. (collectively, the ‘Aberdeen Advisers’). Each
of the Aberdeen Advisers is wholly owned by Aberdeen PLC.
“Aberdeen" is a U.S. registered service mark of Aberdeen PLC
Closed-end funds have a one-time initial public offering and
then are subsequently traded on the secondary market through one of
the stock exchanges. The investment return and principal value will
fluctuate so that an investor’s shares may be worth more or less
than the original cost. Shares of closed-end funds may trade above
(a premium) or below (a discount) the net asset value (NAV) of the
fund’s portfolio. There is no assurance that a fund will achieve
its investment objective. Past performance does not guarantee
future results.
There can be no assurance that the Board will maintain the
Fund's distribution rate at a particular level, or that the Board
will continue a managed distribution policy. Additionally,
distributions may include return of capital as well as net
investment income and capital gains. If the Fund's investments do
not generate sufficient income, the Fund may be required to
liquidate a portion of its portfolio to fund these distributions.
If the Fund's distributions consist of a large amount of return of
capital, it may result in a deterioration of the Fund's assets.
1 Stock exchange-listed investment companies, also known as
closed-end funds, were first invented in the UK in 1868 and are the
oldest form of collective investment vehicles. They pre-date mutual
funds, invented in the 1920s, and exchange-traded funds, invented
in the 1980s. The capital structure of closed-end funds make them
popular for income-oriented investments and portfolios of
relatively illiquid asset classes.
2 Fund Consultants LLC, Feb. 2011. Criteria for emerging markets
inclusion is Standard & Poor’s Emerging Markets Database.
Criteria for fund inclusion is at least 75% gross assets invested
in emerging markets.
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