Were failed auctions caused by any concerns about the credit quality of closed-end funds?
No. The assets of closed-end funds, which are valued on a daily basis, are the collateral underlying the issuance of the preferred shares. As discussed above, funds are required by the Investment Company Act to have at least $2 of assets for each $1 of preferred stock issued. Preferred shares typically have a AAA rating from one or more rating agencies; these ratings are based on both the asset coverage behind the preferred shares and the quality and diversification of the collateral.
