Closed end funds such as ING Asia Pacific High Dividend Income Fund (IAE, quote), Aberdeen Australian Equity Fund (IAF, quote) and The Mexico Fund (MXF, quote) are ideal for investors looking to invest in emerging market economies: high dividend yields and often a discount to the underlying assets.
A closed end fund, according to Wikipedia, is “a collective investment scheme with a limited number of shares. It is called a closed-end fund (CEF) because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.”
Many closed end funds focus on various segments of emerging market investing, ranging from commodities to currencies to individual countries.
The Aberdeen Australian Equity Fund (IAF) focuses on long-term capital appreciation and pays a dividend of 12.82%.
ING Asia Pacific High Dividend Income Fund (IAE) aims for total return and has a high dividend yield of 11.82%.
The Mexico Fund (MXF) has a goal of long term capital appreciation and pays a dividend of 15.92%.
For China alone, several closed-end funds exist, including: Morgan Stanley China Fund (CAF, quote), Greater China Fund (GCH, quote), JF China Region Fund (JFC, quote), the China Fund Inc. (CHN, quote) and Templeton Dragon Fund (TDF, quote).
For the savvy investor, closed end funds can be bought at a discount when trading below the net asset value. For those funds focused on regions or countries, this can happen when the economy is troubled.
At the end of the year, discounts can be had due to year-end tax selling and the January Effect, as detailed in previous articles on www.emergingmoney.com.