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Posted by on October 13, 2008, 10:57 am
The Wall Street Journal publishes every Monday a listing of closed-end
funds (CEF), with their market price (MP), net asset value (NAV),
discount (equal to (MP/NAV-1)). Currently the stated discounts for
CEFs are very wide, more than -30% for many funds. This could be
occurring because
(1) The reported NAVs of some funds may be overstated due to stale
prices, especially in currently illiquid markets such as municipal,
corporate, and especially mortgage debt.
(2) Many investors in CEF are are disgusted with the performance of
their funds, which have underperformed even their open-end
counterparts (which themselves have plummeted) as discounts have
widened, and they want or need to sell at any price.
Maybe some combination of (1) and (2) is true. If (1) is true, I
wonder if the same overstatement of NAV is occurring in some open-end
funds.
I am thinking of shifting some of my investments toward CEFs. Any
thoughts?
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Posted by dumbstruck on October 15, 2008, 4:00 pm
On Oct 13, 4:57 am, beliav...@aol.com wrote:
> Maybe some combination of (1) and (2) is true. If (1) is true, I
> wonder if the same overstatement of NAV is occurring in some open-end
> funds.
>
> I am thinking of shifting some of my investments toward CEFs. Any
> thoughts?
Great idea! I wonder how to quantify a CEF discount in a more timely
fashion than etfconnect.com... or just find and graph one that roughly
tracks an index?
But kind of dangerous, since even the open ended etfs don't seem to
track now. Not only for the logical reasons you suggest, but seemingly
for random craziness. I bought an openend near-SP500-index etf and got
stuck with a sudden 24% spike of the price not connected with any
SP500 rise. The brokers reversed the trade under orders of nasdaq for
any premium over 20% over that period. I had a bond fund also give me
a more modest unexplained spike. Here is a graph (which will only show
properly today - Wednesday) where a 2x inverse fund failed reflect the
underlying index by an insane percentage on Oct 9. It rose 60% in a
couple days while something resembling the index fell much less than
20%
http://finance.yahoo.com/q/bc?s=DUG&t=5d&l=on&z=m&q=l&c=uso
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Posted by dumbstruck on October 15, 2008, 4:24 pm
> Great idea! I wonder how to quantify a CEF discount in a more timely
> fashion than etfconnect.com... or just find and graph one that roughly
> tracks an index?
Oh, it looks like etfconnect WILL let you sort CEF's by current
discount. A spot check of the biggest discounted ones looks like their
discounts are already shrinking from their extremes in September and
may be almost returning to a norm of medium discounts according to my
graphs.
Interesting to see a certain uniformity of what types of funds have
big discounts, but they appear to be suffering a more long term
problem that doesn't bode well for bounceback. I want to somehow ID
CEFs with an only recent increase in discount that could at least have
a chance of dead cat bounce (with a trailing loss sell order
automatically hanging over it).
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Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
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Posted by Avrum Lapin on October 15, 2008, 5:25 pm
In article
beliavsky@aol.com wrote:
> The Wall Street Journal publishes every Monday a listing of closed-end
> funds (CEF), with their market price (MP), net asset value (NAV),
> discount (equal to (MP/NAV-1)). Currently the stated discounts for
> CEFs are very wide, more than -30% for many funds. This could be
> occurring because
>
> (1) The reported NAVs of some funds may be overstated due to stale
> prices, especially in currently illiquid markets such as municipal,
> corporate, and especially mortgage debt.
> (2) Many investors in CEF are are disgusted with the performance of
> their funds, which have underperformed even their open-end
> counterparts (which themselves have plummeted) as discounts have
> widened, and they want or need to sell at any price.
>
> Maybe some combination of (1) and (2) is true. If (1) is true, I
> wonder if the same overstatement of NAV is occurring in some open-end
> funds.
>
> I am thinking of shifting some of my investments toward CEFs. Any
> thoughts?
>
Why other than the discount?
Many closed end funds are thinly traded. Also many, especially income
funds, hold stuff from troubled financial houses - things which are
essentially derivatives (of derivatives?). Note that in some cases the
pay out may consist of significant return of capital
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.
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Posted by on October 27, 2008, 3:58 pm
On Oct 13, 10:57 am, beliav...@aol.com wrote:
> The Wall Street Journal publishes every Monday a listing ofclosed-end
> funds (CEF), with their market price (MP), net asset value (NAV),
> discount (equal to (MP/NAV-1)). Currently the stated discounts for
> CEFs are very wide, more than -30% for many funds. This could be
> occurring because
>
> (1) The reported NAVs of some funds may be overstated due to stale
> prices, especially in currently illiquid markets such as municipal,
> corporate, and especially mortgage debt.
For many closed end funds, if the ticker symbol of the traded shares
is ABC, the ticker symbol of the NAV is XABCX -- the fund ticker with
an "X" added before and after. Charting the NAV of the BLACKROCK
CORPORATE HIGH YIELD ,
http://finance.yahoo.com/q/ta?s=XCYEX&t=5y&l=on&z=m&q=l&p=m100&a=&c=
, it is apparent that the NAV trends, probably due to illiquidity of
many of the bonds in the portfolio. One observes similar trending
behavior in the NAV of the open-end Vanguard High-Yield Corporate fund
http://finance.yahoo.com/q/ta?s=VWEHX&t=1y&l=on&z=m&q=l&p=,m100&a=&c=
.
It may be worth waiting for the NAV to start trending upwards (as
measured by a moving average crossover, for example) before buying
such funds.
--------------------------------------
Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
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