Own the Fund Manager

Neil George

Rather than just investing in a great mutual fund, you can cash in on the actual fund manager.

I previously have recommended closed-end investment companies on Eagle Daily Investor. Indeed, the AllianceBernstein Global High Yield Fund (AWF) is a specialist in generating a large and rising monthly dividend; it is focused on the bonds from transitioning markets around the globe. This fund pays its monthly dividend with a current yield of 8.95 percent. For the past year, the fund has generated a return in excess of 19.4 percent.

I highlighted this fund back in November, as the nation was pouring dollars into what would become the largest Powerball lottery in history. The title, appropriately, was “Powerball Won’t Pump up Your Portfolio.” I showcased the fund, along with some other high-dividend paying investments, as a much more certain investment — not just compared to buying lottery tickets, but also against the general stock market.

Another high-dividend paying investment fund worth bringing to your attention is the AllianceBernstein National Municipal Income Fund (AFB). The fund pays a monthly dividend currently yielding 6.1 percent, with an after-tax equivalent yield of 9.4 percent (assuming an income tax rate of 35 percent). For the past year, it has generated a total return of more than 8 percent. This fund would have been especially advantageous to hold during the debates about the yet-to-pass fiscal cliff back in the end of 2012.

Now, both of these funds remain great buys – more so at this time of the year, when income taxes are coming due. These kinds of funds tend to see some selling by folks needing cash to pay their bills from the IRS. But in addition, I’d like to suggest that you look at the actual fund management company that runs them.

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AllianceBernstein Holding LP (AB) is a company which manages collections of investment funds, including the two bond funds noted above, which are among my favorites.

The key is that the more successful these funds, as well as the other funds under management, become, the higher the fee income will rise for the management company.

AllianceBernstien Holding LP is structured as a publicly traded partnership, which, in turn, owns the shares of the operating fund company. This unique structure offers a great means for individual investors to gain access to ready and rising cash flows, while taking advantage of tax rules for partnerships that avoid the double taxation of regular corporations.

The dividend flows vary by quarter, as the funds pay their fees to the LP, but what counts is how they add up during the entire year and keep piling up year after year.

Right now, that means that you’re buying into a dividend yield of more than 7.3 percent, with further gains coming as their funds continue to perform and grow. Net revenues have soared during the past year by some 154.7 percent. The asset base has expanded to over 437 billion dollars, climbing another 6 percent last year and advancing further so far this year.

AllianceBernstein (AB)

So, I recommend that you buy some shares of AB, along with shares of their two aforementioned funds, for high dividends and growth during the rest of the year.

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