Discuss the advantages and disadvantages of closed-end country funds (CECFs) relative to American depository receipts (ADRs) as a means of international diversification.

Advantages of Closed-End Country Funds (CECFs):
1. Lower initial cost: CECFs typically have a lower initial investment requirement compared to ADRs and allow investors to diversify their portfolios more affordably.

2. Larger selection of investments: CECFs offer a wider range of international securities than ADRs, allowing investors to access a larger number of investments in different countries and sectors while still minimizing risk through diversification.

3. Tax benefits: Investing in CECFs can provide tax benefits as the fund’s income is not subject to US withholding taxes if held for at least two years in an offshore account or through a qualified retirement plan.

Disadvantages of Closed-End Country Funds (CECFs):
1. Lack of liquidity: The lack of liquidity associated with CECF investments can make it difficult for investors to exit positions quickly or efficiently, especially when markets are volatile or there is limited trading activity on the exchanges where the funds are listed.

2. Management fees: Investors investing in CECFs must pay management fees which may reduce overall returns on their investments over time.

3. Volatility risk: As with any type of investment, there is always some degree of volatility that comes with investing in closed-end country funds, which could result in losses if not managed appropriately.