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Cornerstone Funds: Reevaluating Their Merits After a Rating Downgrade
ByAinvest
Tuesday, Oct 14, 2025 3:15 pm ET1min read
Cornerstone Strategic Investment Fund (CLM) and Cornerstone Total Return Fund (CRF) have been downgraded. The last update on these funds was in September 2024, when it was suggested that investors should take a fresh look at them.
The Cornerstone Strategic Investment Fund (CLM) and Cornerstone Total Return Fund (CRF) have been downgraded, marking a significant shift in their investment outlook. The last update on these funds was in September 2024, when they were recommended for income-oriented investors. However, recent developments warrant a fresh look at these funds.The primary reason for the downgrade is the elevated premium of the funds heading into October. The upcoming 2026 dividend calculation may result in a cut, which could lead to a buying opportunity as investors react to the news. The premiums for both funds are currently in the 21% range, indicating that they are not on sale at the moment [1].
The funds have delivered a total return that is more than double what the S&P 500 has returned in the same period. However, the managed distribution for the following year is typically based on 21% of the NAV as of the end of October the previous year. If the 2026 distribution is based on the current NAV of $6.78, the managed monthly distribution would be reduced to $0.1186. The funds have approximately two weeks to increase the NAV before the 2026 distribution is determined [1].
The funds currently yield almost 18% annually before the DRIP discount, making them attractive for income investors. However, the high premiums and potential dividend cuts pose risks for investors. The best time to buy these funds was back in early April during the tariff tantrum, when market prices were at recent lows below $7. The next opportunity to buy is likely to be after October 31 if the NAV is below the previous year’s NAV and a distribution cut in 2026 occurs [1].
Investors should consider the unique DRIP policy, which reinvests shares at NAV, often trading at substantial premiums. This policy can provide significant benefits to plan participants. However, the high premiums and potential dividend cuts should be carefully considered before investing [1].
In conclusion, while the Cornerstone funds offer strong total return potential and high-yield income, the elevated premiums and potential dividend cuts pose risks for investors. The funds may be more suitable for investors who are willing to take on higher risks in exchange for potentially higher returns.
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