CEF managers' ability to hold onto underpriced illiquid securities in times of market stress represents an advantage over open-end funds that may have to sell to meet unexpected redemptions, says Morningstar's Cara Esser.
Although the asset class saw some changes during the first six months of 2012, the numbers were somewhat similar to those at the 2011 midpoint.
As investors ditched certain income-producing assets on worries of rising rates, an abundance of fixed-income CEFs moved into undervalued territory, according to Morningstar's Cara Esser.
Increasing demand, tightening supply, and expectations for higher rates and inflation should bring better muni returns in the coming years, says Nuveen's John Miller, Puerto Rico notwithstanding.
CEFs have a role in risk-tolerant portfolios.
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