Closed-end funds (CEFs) hold approximately $300 billion in assets, significantly smaller than the $13.5 trillion market for exchange-traded funds (ETFs). Currently, the average CEF yields 8.7%, attracting investors looking for income through high dividends.
Notably, billionaire investor Bill Ackman has ventured into the CEF market with the launch of Pershing Square USA Ltd. (PSUS) in April, which has since declined by 17.7% from its IPO, moving to a 12% discount to its net asset value (NAV). This pattern reflects a lack of confidence in Ackman’s management by investors.
PSUS charges a flat annual fee of 2%, which, while lower than the average fees for CEFs, does not include costs from planned leverage and preferred shares. Investors are urged to consider other options in the CEF market due to PSUS’s declining value and high fees.
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