Exactly how mutual funds leverage is over my head.... At least in some cases, closed-ends leverage themselves by issuing preferred stock in a separate issue, often privately placed. Preferred shareholders get a fixed interest rate back. The fund then uses the proceeds from the preferred issue to buy additional assets whose values are included in the net asset value of the common shares. Because the obligation to the preferred shareholders stays constant, the common gets the more volatile price movements from the leveraged assets.dan
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