Many investors are making the right choice to build their core portfolios around low-cost, liquid, and diversified ETFs geared towards dividend paying stocks and bonds. These funds provide transparent exposure to a broad range of asset classes without the drag of high expenses.

While this core exposure is important, there may also be a desire to further diversify your holdings towards alternative investment styles with a penchant for higher yields. This is the foremost objective behind ETFs that invest in a basket of closed-end funds (CEFs). 

Closed-end funds offer varying risk dynamics than a traditional ETF. They are pooled investment vehicles with set share amounts that can trade at a premium or discount to their underlying net asset value. Furthermore, they often employ leverage, options, and other sophisticated portfolio management techniques to boost their yields for shareholders.

The following are five dedicated ETFs that invest in a broad range of CEFs for those investors that want to enhance the yield of their portfolio or seek out varying asset classes.

PowerShares CEF Income Composite Portfolio (PCEF)

PCEF is the largest and perhaps most well-known fund in this category. This ETF has $667 million dedicated to an index of 140 closed-end funds. The benefit of a fund like PCEF is that you get highly diversified exposure to virtually every corner of the closed-end fund market. It’s like owning the benchmark for this investment group.

The portfolio is allocated approximately 33% towards stock or option income strategies and 67% towards high yield fixed-income. The current 30-day SEC yield is a generous 7.31% and income is paid monthly to shareholders.

PCEF charges a management fee of 0.50% for the construction and maintenance of the fund. However, it’s total expense ratio is reported at 2.02% because of the additional 1.52% blended expenses of the underlying CEFs. These must be transparently reported according to securities guidelines.