Arguably the hottest trend and sector among investors these days has to be the private markets. Both private equity and credit interest have exploded in recent years as investors look to find non-correlated returns. However, while access to the private markets has grown, for many retail investors adding private credit or equity into their portfolios is still difficult.
However, a very old school fund type and some expanded rules changes could be the answer retail investors are looking for.
Closed-end funds (CEFs) can be a way to access private assets. Thanks to their structure, many CEFs have added private credit and equity stakes to their holdings. And now with the SEC changing limits on what they can and percentages they can hold, CEFs could see some significant growth behind them.
Private Credit & Equity Growth
As stocks and bonds have continued to become ever increasingly correlated, investors have been looking for an edge and a way to get better diversification from their portfolios. Answering this call has been the private markets. Both private equity and private credit have seen torrid growth as they offer many benefits to a portfolio.
Essentially, private assets are easy to understand — they are loans, bonds, and ownership stakes that don’t trade on the public exchanges like shares of Walmart Inc or a bond issued by the U.S. Treasury.
Because an investor can’t easily convert them to cash or because private assets have pricing that is based on supply/demand, they are often seen as having lower volatility than public assets. Moreover, this fact also allows them to have higher returns over the long haul than versus public stocks or bonds.
When added to a traditional 60/40 portfolio, the benefits of private assets really begin to shine. Ultimately, they create a more efficient frontier. That is, for the same level of risk, a portfolio with private assets can potentially generate higher returns than a portfolio without private assets. This chart from asset manager Schroders shows the efficient frontier in action.
Source: Schroder’s
CEF Structure Is The Win
With the potential to get higher returns for the same or less risk, investors have gone gaga for private assets in their portfolios. However, access has been pretty much one-sided.
If you’re a significant endowment, pension, or insurance fund, you can call up Blackstone or Apollo and send them $100 million to invest in private credit or equity. But for regular Joes, accessing this world has been difficult. There have been recent developments with ETFs offering access to private credit. However, those funds haven’t gone without some headaches.
However, there is a way to gain access to private assets that even allows for exchange-traded capabilities. And that’s closed-end funds.
The secret is in the CEF structure. Because closed-end funds are launched via an IPO and then their shares trade on an exchange, the managers of the fund are not subjected to the whims of investor withdrawals. This has long worked to the benefit of the CEF, allowing them to own less liquid securities, such as long municipal bonds, senior loans, and other asset-backed securities.
And that’s also included private assets.
For example, ASA Gold and Precious Metals Ltd ,which is a CEF that is focused on gold/precious metals, holds a 14% weighting in private gold miners and royalty firms. 1
Another example has been BlackRock. Several of its funds, including the BlackRock Capital Allocation Term Trust, BlackRock Science and Technology Term Trust, and BlackRock Health Sciences Term Trust, have invested more than $2.6 billion across 150 companies in private credit and equity assets.
These are just a few examples. But others exist within the infrastructure, real estate and debt sectors. With CEFs, they have the opportunity to own a swath of private assets with the ease of simply clicking “buy” in their brokerage accounts. The ease and expansion of private assets in CEFs has the potential to get even larger.
Under the 1940 Investment Company Act, the SEC has placed a limit on closed-end funds. If they hold more than 15% of their holdings in private assets, they were required to limit their sale to accredited retail investors with a minimum starting investment of $25,000. However, that all changed a week ago. Thanks to the growth of private assets and lobbying from the Securities Industry and Financial Markets Association (SIFMA), the SEC has now changed the rules and removed the 15% cap. They had also recently removed the 15% tax on real estate and infrastructure assets. 2
By removing the cap, closed-end funds now have the potential to get private assets into a portfolio and unlock private equity/credit for the masses. Already, pundits are now predicting that this could usher in a new wave and revival of the fund type. Over the last decade alone, private fund assets have nearly tripled, from $11.6 trillion to $30.9 trillion. With the limits gone, the asset potential is huge for CEFs.
Private Asset Surge
With private equity and credit interest starting to grow among retail and smaller investors, closed-end funds offer a great way to get that access. And now that the SEC has removed caps and retail investor minimums, the potential to add private assets via a CEF has only grown.
By focusing on CEFs, investors can access a liquid fund vehicle that can own illiquid assets — essentially the best of both worlds. And as such, they can gain all the benefits of the assets while still maintaining a liquid intra-day tradable portfolio.
Top-Performing CEFs
These CEFs are sorted by their YTD total returns, which range from 6.5% to 15.8%. They have AUM between $100M and $1.65B and expenses between 0.86% and 3.4%. They are currently yielding between 6.1% and 13.1%.
| Ticker | Name | AUM | YTD Total Ret (%) | Yield (%) | Exp Ratio | Security Type |
|---|---|---|---|---|---|---|
| XAGIX | abrdn Global Infrastructure Income Fund | $610M | 15.83% | 12.66% | 2.04% | CEF |
| XAEFX | abrdn Emerging Markets ex-China Fund | $344M | 13.02% | 10.4% | 2.04% | CEF |
| XIAFX | abrdn Australia Equity Fund | $130M | 12.07% | 10.4% | 1.94% | CEF |
| XJEQX | abrdn Japan Equity Fund | $93M | 11.97% | 6.09% | 0.83% | CEF |
| XBGRX | BlackRock Energy Resources Trust | $380M | 9.6% | 6.1% | 1.29% | CEF |
| XJQCX | Nuveen Credit Strategies Income Fund | $790M | 9.2% | 13.1% | 2.67% | CEF |
| XJFRX | Nuveen Floating Rate Income Fund | $1.22B | 8.7% | 12.8% | 3.4% | CEF |
| XBGTX | BlackRock Floating Rate Income Trust | $285M | 8.2% | 12.1% | 3.05% | CEF |
| XBDJX | BlackRock Enhanced Equity Dividend Trust | $1.65B | 7.3% | 9.1% | 0.86% | CEF |
| XJLSX | Nuveen Mortgage and Income Fund | $104M | 7% | 10.8% | 1.57% | CEF |
| XJPCX | Nuveen Preferred Income Opportunities Fund | $783M | 6.5% | 9.3% | 2.68% | CEF |
Bottom Line
Overall, private assets — both equity and credit —offer portfolios strong benefits and long-term returns. Thanks to their structure, closed-end funds make for a great way to access those assets.
1 ASA (May 2025). April Fact Sheet
2 Ropes & Gray (May 2025). SEC Drops 15% Limit in Private Funds for Retail Closed-End Funds
