1. CECFs offer lower initial costs than ADRs. They also allow for investors to increase their diversification and affordability.
2. Greater selection of investment options: CECFs have a greater range of international securities available than ADRs. This allows investors to gain access to a larger variety of foreign securities while still minimising risk by diversification.
3. Tax benefits: Investing in CECFs can provide tax benefits as the fund’s income is not subject to US withholding taxes if held for at least two years in an offshore account or through a qualified retirement plan.
Closed-End Country Funds’ (CECFs), Disadvantages
1. Insufficient liquidity: Investors can find it hard to quickly exit their positions from CECF investments if there are limited trading activity or volatile markets.
2. Management fees: CECF investors have to pay management fees. This can affect their investment’s overall return over time.
3. Volatility risk