Income is a big part of investors' returns. Stocks, mutual funds and fixed income ideas in this column are featured because they are relatively solid in their ability to pay dividends or interest. We're giving income investors a resource to start their research for investments that give better yields with lower risk.

October 6, 2010 - Liberty All*Star Equity Fund (USA-NYSE) is a closed-ended equity mutual fund managed by ALPS Advisers, Inc. The fund places money with advisors. Current managers are Matrix Asset Advisors, Inc., Pzena Investment Management, LLC, Schneider Capital Management Corporation, Chase Investment Counsel Corporation, and TCW Investment Management Company.

A couple of things to note immediately: this is a rather small, closed end fund, with total money of about $800 million. It also trades at a discount to net asset value (NAV). Currently, the discount is 14% which means you're buying $1 worth of assets for 86 cents. If you're a bargain shopper, that appeals.

The third and maybe most important aspect of USA is its dividend. Last year, it was 9 cents a share. This year it will total 28 cents. The payout is contingent on how the portfolio performs, and the last 2 years in the equity markets have been brutal so performance and payouts reflected that. But if you're bullish on stocks, believing the economic recovery is imminent, then you'll want to know more about USA.

The first quarter performance of the fund demonstrated the volatility an investor can expect. The NAV was down 15% to $4.60 a share. The reason: the stock market was off. This fund moves a little more than the market as the Beta is 1.34 which means it moved 34% higher and lower than the S&P 500 index in the last year.

More numbers: Market Cap is $813 million. Trailing P/E is 8.15. Price to book is .84. Return on equity for the last 12 months was 12.20%. There are 182.36 million shares outstanding. Average volume per day over the last 10 days was 646,586 shares a day so there is decent liquidity.

Income investors looking for a little more than income, in the form of capital gains, will find this fund interesting. It comes with added risks from most income vehicles featured in this column as it moves with the market, only a little more so. While the discount to NAV is currently 14%, in 2006, there was a premium of 5% on the fund. If the market continues to rebound and the economy stays on course to heal, expect this fund to go back to a premium.

- Company Web site: www.all-starfunds.com

- Ted Allrich