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So as we officially begin this holiday season, I'm delighted to report th at there are a few unique, quirky and innovative investment options that stand out from the usual fare of pharmaceuticals, S&P 500 index funds a nd other financial fruitcakes.
E-mini futures at th e CME, the most exciting and innovative products these days are being cr eated as exchange-traded and closed-end funds. ETFs and CEFs have severa l differences, yet their defining characteristic is very much the same: Both are mutual funds that trade like stocks, meaning they can be bought and sold throughout the trading day.
This innovative fun d provides immediate, cost-effective access to an asset class that had p reviously been out of reach to most individual investors. It's a dramati c advancement that will alter the investment landscape as we know it. Back in the mid-1990s, I recall a palpable change in the tenor of equity markets once real-time quotes replaced the delayed ones that had been th e norm. Markets got tighter, faster and generally more efficient. The in troduction of StreetTracks Gold Trust, along with the similar and compet ing iShares Comex Gold Trust ETF due out later this year, will prompt a similar maturation within the gold market. Thanks to active arbitrage be tween physical gold, gold ETFs and gold futures, spreads will tighten an d pricing will become more transparent, prompting a more liquid and effi cient market for all. Judging from the volume GLD has attracted in its f irst few days, that process is already underway.
Such funds invest in senior loans made to a variety of corporate borrowers. While the loans are often made to companies with less-than-perfect credit ratings, senio r loans are, by definition, the highest-ranking claim on a company's ass ets. In the event of a default or bankruptcy, the senior creditors get p aid first. The most unique characteristic is that, unlike traditional bonds, which p ay a fixed interest rate over a specific period of time, the loans held in bank-loan funds' portfolios float. This means that they reset periodi cally based on a benchmark interest rate, such as the prime rate or the London Interbank Offered Rate (Libor). The upshot is that these are amon g the only fixed-income investments I'm aware of that actually thrive wh en interest rates rise.
Werel dhave, a European-based property company that isn't available to US in vestors as an American Depository Receipt, or ADR. The firm boasts exten sive property holdings in Belgium, France, Finland, the Netherlands and Spain, among others.
Westfield Group, which is the larges t retail property owner in the world, yet doesn't trade in the US The company's portfolio includes 124 shopping centers in Australia, New Zeal and, and the UK, as well as in the US Again, like BGT and GLD, what IGR offers is exposure to an asset class no t readily available to most US investors.
two years back, there have been few opportunities for US investo rs to gain exposure to international real estate. The leveraged fund spo rts an 8% dividend yield and trades at an 11% discount to its net asset value, or NAV, down from a 4% premium earlier in 2004.
UE Waterheater Income fund, both of which don't trade i n the US The portfolio is rounded out by a hefty 31% exposure to senio r loans from infrastructure-related companies in industries such as tele com, health care and cable TV. The 6% annualized dividend yield, paid monthly, hasn't yet attracted enou gh interest to narrow the fund from trading at a dramatic 12% discount t o NAV. And while the fund has lagged more pure-play utilities offerings such as iShares Dow Jones US Utilities Sector Index fund (IDU), the div ersified, international exposure to a number of high-income sectors with in the infrastructure theme makes it a completely unique offering and in my opinion, one worth considering tucking under your tree this holida y season.
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