New York, USA – The Liberty All-Star Growth Fund (NYSE: ASG) has been under scrutiny, particularly in comparison to its sister fund, the Liberty All-Star Equity Fund (USA). Known for its growth-oriented approach, ASG stands out from USA, which leans more towards value investments. Both funds have managed distribution plans, with ASG paying out 8% of net asset value annually, while USA has a slightly higher 10% distribution policy.

Unlike traditional dividend payments, these closed-end funds rely on capital gains and occasional return of capital to meet distribution requirements. This unique approach may appeal to income-oriented investors seeking a more passive income stream. ASG, with a narrower average discount compared to USA, presents a potentially more attractive investment opportunity given its valuation and relative performance.

ASG’s investment objective is centered on seeking long-term capital appreciation through a diversified portfolio of equity positions. ALPS Advisors, the fund’s management, employs a multi-managed strategy involving separate segments for small-cap, mid-cap, and large-cap growth investments. In a recent development, the Board is considering changes to the large-cap growth bucket’s management, pending approval at the upcoming annual meeting.

USA, on the other hand, pursues total investment return by focusing on long-term capital appreciation and current income through a diversified portfolio of equity securities. While sharing a similar multi-manager approach, USA emphasizes value and growth investments. The fund’s larger size and higher average daily trading volume contribute to improved liquidity compared to ASG.

Performance-wise, ASG and USA have shown varying results compared to the SPDR S&P 500 ETF (SPY), with USA leading in certain periods. The fluctuating performance is partly attributed to the funds’ managed distribution policies, with ASG paying out 8% annually and USA 10%. Changes in net asset value influence the quarterly distributions, with both funds navigating the complexities of tax classifications such as return of capital (ROC).

Analyzing the portfolios of ASG and USA reveals sector allocations that are not significantly different, though specific weightings may vary. Both funds hold diverse positions across sectors, with limited overlap in their top ten holdings. Factors like exposure to mega-cap tech stocks and expense ratios play a role in shaping their performance relative to benchmarks like the SPY.

In conclusion, ASG and USA offer straightforward equity exposure with managed distributions, catering to income-oriented investors seeking passive income streams. While differences exist in their sector allocations and performance, both funds present unique opportunities for investors looking to diversify their portfolios. The interplay between discounts/premiums, performance, and distribution policies adds layers of complexity for investors to consider when evaluating these funds.