The 8% "Lazy Income Fund"

I refer to this ETF as my "Lazy Income Fund." The fund's return isn't lazy, but the fund itself does a lot of work so you don't have to.

At its core, CEFS is an Exchange Traded Fund (ETF) that invests in Closed-End Funds (CEFs), essentially making it a fund of funds. This structure allows it to execute a key strategy: buying CEFs at a discount to their Net Asset Value (NAV), and selling them when that discount shrinks. For an investor, this can boost returns even if the value of the underlying assets doesn't change. While this is a strategy any investor could technically pursue, it requires monitoring hundreds of funds to find mispriced opportunities.

What truly sets CEFS apart, however, is its management's unique approach as an activist investor. The fund manager, SABA, takes aggressive steps to increase shareholder value in its holdings. For example, they've been known to pressure other major asset managers to unlock value for shareholders, using tactics like lawsuits, or nominating their own people to corporate boards. This approach is driven by the fund's founder, Boaz Weinstein, a former chess master and (amateur) blackjack card counter, who views the market as a game to be won.

In terms of performance, the fund has a history of outperforming its direct competitors, such as FCEF, PCEF, YYY, and FOF. Over the long term, CEFS is a clear winner in this space. It has also demonstrated resilience, proving to be less volatile than the S&P 500 during both the 2022 bear market, and the April 2025 selloff. With a consistent yield of around 8%, the fund is not meant to beat the S&P 500 for total return, but its stability and high income, make it a valuable diversification tool for my portfolio.

The operating expenses associated with CEFS can look high on paper (over 4%), but it’s important to understand the breakdown. The direct management fee is 1.1%, but there are additional expenses related to its activist campaigns, leverage, and the fees of the underlying funds it holds. However, the yield is what you get after all these fees have been deducted.

Ultimately, I hold CEFS for its consistent income and its proven ability to navigate market volatility. Its unique activist strategy, led by a fascinating manager, provides a level of value that I can’t find in other funds. I've maintained my full 5% allocation since my last review, and plan to hold it as long as the fund continues to perform.