Today I want to tell you about a fund that is highly unusual in a way that matters a lot to many folks: It is free from a management-fee perspective. In fact, this fund — a closed-end fund (CEF), to be precise — is more than free: It has negative management costs! It’s called the BlackRock Science and Technology Term Trust (BSTZ), writes Michael Foster, editor of CEF Insider.
What do I mean? Well, usually index funds sell themselves on being cheap. Fees on the Vanguard S&P 500 ETF (VOO), for example, are just 0.03%, or $300 in annual fees for every $1 million invested, in other words. There are even funds out there that cost nothing, like the Fidelity ZERO Total Market Index Fund (FZROX), which has no expenses at all.
Sounds attractive, right? Well, not so fast. There are, of course, many things to consider when picking a fund besides fees. But let’s for the sake of argument say that fees are your highest priority. In that case, we still haven’t dug to the depths of how cheap funds can be.
Enter the world of negative ownership cost (NOC). Because many CEFs trade at discounts to net asset value (NAV, or the value of the assets in their portfolios), there are some easy ways to buy CEFs whose discounts are so big that the fund’s overall fees become negative.
We discussed the math behind this in a recent article, so let’s skip to the good bit: BSTZ. It recently traded at a huge discount to NAV, 20.6%, and it featured a -0.34% net ownership cost. This one also yields 7.7%.
The chart shows a clear snapshot of a CEF buying opportunity: At my CEF Insider service, we love to buy more of a CEF when it’s still deeply discounted, but that discount has momentum (or it’s moving swiftly toward par. You can clearly see that here).
We also like BSTZ because it’s managed by BlackRock, the world’s biggest asset manager — and that opens doors for us. As you’d expect from a tech fund, BSTZ gives us positions in firms like NVIDIA (NVDA), Synopsys (SNPS), whose products help with the design of semiconductors, and Tesla (TSLA). But BSTZ also invests in privately held techs — including those in the AI space — that individual investors like you and I can’t normally buy a piece of.
These companies can take off when they eventually go public, but of course, they carry risks, too. This is why we trust BlackRock, with its boundless research resources, to navigate this market for us and get us into the best private firms. That, plus the discount, dividend, and NOC, make BSTZ a worthy addition to your portfolio’s tech allocation.
Recommended Action: Buy BSTZ.
