The majority of closed-end funds operate by utilizing leverage in the form of borrowings, issuing debt instruments or preferred to enhance their potential returns. However, that comes with its own consequences as it amplifies volatility to the upside but also potentially to the downside. Further, as we are now in a higher rate environment, a large portion of the borrowings being utilized by CEFs are seeing their interest rates climb to 6%+. Along with the generally higher expense ratio, that can leave very little room to earn a spread above those expenses.