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After the Dow plunged over 1,000 points on the morning of August 24, 2015, the trading and liquidity of E.T.F.s came under the spotlight. E.T.F. discounts widened to as much as 30% for some funds that morning, as trading in E.T.F.s dried up during the plunge. Peter Kraus, chairman of AllianceBernstein, questions the safety of E.T.F.s in the New York Times article, “The Man Who Hates E.T.F.s.”  

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CEF Market Update: Wide Discounts Make for Attractive Opportunities

Portfolio Specialist Allen Webb sits down with Portfolio Manager Steve O’Neill to take a closer look at the CEF market for the current month.

Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This information is provided for informational purposes only and should not be considered tax, legal, or investment advice. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Opinions referenced are as of 7.29.2015 and are subject to change due to changes in the market, economic conditions, or changes in the legal and/or regulatory environment and may not necessarily come to pass.

Past performance is not a guarantee of future results.

The S&P 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy based on the changing aggregate market value of these 500 stocks. The index cannot be invested in directly and does not reflect fees and expenses.

The price at which a closed-end fund trades often varies from its NAV. Some funds have market prices below their net asset values – referred to as a discount. Conversely, some funds have market prices above their net asset values – referred to as a premium.

The VIX is ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge.”

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In a recent Wall Street Journal article titled “Bond Market Bloodbath Is in the Math,” Richard Barley discusses the current state of the bond market and the extent to which duration can impact future fixed income returns.  After a very strong 2014 and January 2015, global interest rates have charged higher in recent weeks – particularly on the long end of the yield curve.  Since the short end of the yield curve in most countries remains anchored at very low levels, long rates moving higher has resulted in a steeper yield curve.  In terms of bond performance, this translates into relatively stable performance from short dated (or lower duration) fixed income and much more volatile (and recently negative) performance from long dated, long duration bonds.  For more on this topic, check out the article below.

 

WSJ – Bond Market Bloodbath Is in the Math

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Bloomberg recently ran a piece entitled, How ‘Safe’ Investments Could Destroy Your Portfolio, focusing on strategies investors have historically pursued for income that could lead them astray in the current market environment.  Broadly speaking, we agree with the sentiment here.  Due to the U.S. Federal Reserve’s zero interest rate policy, investors have been pushed out the risk curve in order to meet their income requirements or total return expectations.  Thus, a normalization in Fed policy could prove problematic for certain “yield” assets such as dividend equities, high yield bonds, and other sorts of alternative income strategies.  We are attempting to mitigate these risks in our clients’ portfolios by shifting away from dividend equities and not taking on excess credit and/or interest rate risk in order to reach for yield .

Bloomberg – How ‘Safe’ Investments Could Destroy Your Portfolio

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They say no news is good news, and in the case of 2014 this was accurate for American taxpayers. Without any significant legislative changes occurring throughout the year or predicted entering 2015, traditional estate and tax planning techniques for a low-interest rate environment prevailed. In the mid-term elections, we saw a major shift in GOP power with the Republican Party taking control of the Senate by picking up six seats from the Democrats, in addition to strengthening their grip on the House of Representatives. In 2015, we can expect to see:Read More…

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Validating Tax Status of Grantees

Foundation Source advises that Private foundations must validate the exempt status of a nonprofit before making a grant and must do so each and every time, even if granting to the same organization. If a foundation grants to an organization that has not maintained its status as an IRS designated public charity, it could result in significant tax penalties…”

If you have a private foundation or plan to establish one, the following article may be helpful in providing an overview of the compliance issues around validation. To read more, click here: Foundation Source – Validating Tax Status ADV – July 2014

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The opinions expressed are those solely of the contributor and do not necessarily represent those of Hillview Capital Advisors, LLC, (“Hillview”). Information presented is for educational and informational purposes only. This website is in no way a solicitation or an offer to sell securities or investment advisory services. Nothing on this website should be interpreted to state or imply that results of the past are any indication of what will happen in the future. The contributors and Hillview disclaim responsibility for updating information posted. In addition, the contributors and Hillview disclaim responsibility for third-party content, including information accessed through hyperlinks, should there be any posted.