TY - JOUR T1 - Leveraged Closed-End Equity Funds JF - The Journal of Investing SP - 73 LP - 82 DO - 10.3905/joi.2000.319402 VL - 9 IS - 1 AU - Albert J. Fredman AU - Eugene L.. Destabler Y1 - 2000/02/29 UR - https://pm-research.com/content/9/1/73.abstract N2 - Since 1996, a handful of closed-end equity funds have issued non-convertible preferred stock to raise additional capital. Because of favorable long-term interest rates and a 1989 tax ruling stipulating that distributions of investment company income and capital gains must be allocated proportionately to preferred and common shareholders, this form of leveraging has become particularly appealing. This article review the different ways close-end funds can raise capital. It analyzes the concept and risks of leverage, examines the history of leveraged close-end municipal bind funds, and then focuses on the use of leverage by equity funds. While preferred leverage can enhance long-run returns, it also increases risk and may pose problems for manager in bear markets. S&P 500 rolling five-year returns are analyzed over the 1945-1998 period to determine the potential impact of leverage during favorable and unfavorable markets. ER -