Members Mailbag: 10.3% Yield Lazard CEF (LGI)

Members Mailbag Submission:

Just curious since you are starting to cover closed end funds and recommend them...I've always been curious about LGI...its done very well over the years, does not have a very high leverage of 11.7 percent , currently has a discount of 5.41 percent, a large distribution of 10.32 percent which has actually been increased in the last three years. I highly respect your opinion and would love to see your thoughts on this one, Thank you, Robert

Blue Harbinger Reply:

It looks like The Lazard Global Total Return and Income Fund (LGI) sets its distribution rate annually on 12/31 as 7% of the NAV at that time. With the market down this year, this fund is down nearly 30%, so a significant distribution cut is likely coming. I am generally NOT a huge fan of equity (stock) CEFs because you can usually do better just buying a basket of stocks on your own (the distributions on most stock CEFs are often mainly from capital gains, not dividends). However, this one does have some attractive qualities like you mentioned (such as discount to NAV and a modest use of leverage), plus it gets you some interesting non-US market exposures. I don't think this is a horrible one, but the management fee is more than 1% per year, and that will be a drag on your returns over time. From an equity CEF standpoint, I think Adams Diversified Equity Fund (ADX) is a good one, as we recently wrote about here. -Just my two cents.