Closed-End Funds Are Catching Advisers’ Attention

Financial advisers are increasingly turning to closed-end funds, especially for retirement income, a study by Aberdeen Asset Management found.

Closed-end funds have a number of uses, particularly generating income in retirement as well as for individual retirement accounts. Income is the primary reason for including closed-end funds in their recommendations, advisers say, citing ease of use and access to professional investment management, according to a survey of advisers.

Some significant survey results are that advisers:

  • recommend closed-end funds (63% vs. 52%  a year ago);  
  • cite that their clients implement their closed-end fund recommendations (50% vs. 45% a year ago);
  • feel that additional research coverage on closed-end funds would improve their recommendations (62%); and
  • say that increased client awareness and understanding of closed-end funds would improve their recommendations (45%)

Fifty percent of advisers used closed-end funds when developing investment recommendations, outpacing the use of alternative investments (44%) or target-date products (35%). A majority of advisers (64%) said they recommend closed-end funds to clients between the ages of 45 and 65. About half (52%) recommend the funds to clients under 45.

“This year’s study reconfirmed that advisers continue to clamor for more information to help their clients understand the benefits of closed-end funds,” said Gary Marshall, chief executive of Aberdeen Asset Management, part of Aberdeen Group.

The survey, the company’s second annual, was conducted online from March 29 to April 20 by Harris Interactive and polled 508 financial advisers through a panel of finance professionals managed by Harris.

Additional survey results are available here