The Federal Reserve has made the commitment to maintain interest rates at artificially low levels for the next two years. Meanwhile, worries of stagnating economic growth continue to weigh on investors. Consequently, investors spent much of August in “risk-off” mode and Treasury bonds became the investment darling du jour. In a sign of the market’s aversion to risk, on Aug. 18, the yield on 10-year Treasuries hit an all-time low of 1.98 percent, creating a negative real yield environment in which investors essentially paid the government to hold their money.

There are some indications that an almost-daily roll call of negative news has begun to numb investors’ instinct for safety. Nevertheless, stocks and bonds that carry even the slightest hint of risk have fallen out of favor. Consequently, the yields on the lowest-risk stocks and bonds have been driven to abysmally low levels.

Alpine Dynamic Dividend (ADVDX) can be an effective antidote for today’s low-yield environment, though it’s suitable only for investors with an appetite for risk.

The fund’s management runs the portfolio on a three-sleeve strategy that amounts to a dividend-capture strategy. Management turns over one sleeve of the portfolio every 61 days to maximize dividend flows. But the timing allows the fund to offer distributions at the more favorable qualified dividend tax rate of 15 percent. The second sleeve of the portfolio is geared toward financially solid companies that offer attractive dividend yields and the potential for capital appreciation. The portfolio’s third sleeve is dedicated to turnaround companies that have fallen on hard times but are in the process of reviving their businesses.

This three-sleeve approach has resulted in an eye popping 11.9 percent yield, making Alpine Dynamic Dividend one of the highest-yielding funds in Morningstar’s Large-Blend category. Each month, management sets a monthly payout target—currently 4.2 cents per share—and then works to meet it, a strategy that largely accounts for the fund’s high dividend yield.

Equally impressive is that none of the fund’s distributions have been classified as return of capital (ROC). As yields have fallen across the board during the past few years, it has become increasingly common for high-yielding funds to return a portion of their investors’ capital to maintain yields. We generally view ROC as a detriment to mutual fund investors and are encouraged that Alpine Dynamic Dividend hasn’t used ROC to maintain its payouts.

However, this strategy does have its drawbacks. The fund’s yield may be high but so is its turnover rate, which recently clocked in at sky-high 176 percent. However, Alpine Dynamic Dividend has made a capital gains distribution in only one year of its eight-year history. This means that management’s succeeded in matching capital gains with capital losses, which makes the fund extremely tax efficient.

Nevertheless, the fund racks up significant brokerage commissions—more than $7.2 million last year—which creates a high performance hurdle for Alpine Dynamic Dividend. It also leads to a fairly high annual expense ratio of 1.18 percent.

Another potential red flag: The fund’s unique investment strategy and rapid-fire trading negate most of the defensive qualities offered by dividends. The fund’s performance in 2008 provides an excellent example of this pitfall. In that year Alpine Dynamic Dividend plunged by almost 49 percent compared to a 37.8 percent loss for its average peer.

However, we don’t believe that another global recession is in the works. Although economic growth will be sluggish, the global economy should keep its head above water.

With these weak prevailing winds, Alpine Dynamic Dividend’s three-legged investment strategy is an interesting—if volatile—way to add yield to your portfolio.