A nice piece on the advantages of closed-end funds. The downsides include:
1. If you need to sell but the fund is trading at a discount to NAV you lose more than if you bought a mutual fund, ETF, or closed end fund when the manager makes a market to ensure the price is always equal to NAV.
2. Activist hedge funds may buy up shares at a discount to NAV and then demand that the fund be wound up. This is good in the short-run for investors but removes funds from the market. We saw this in the GFC here in Australia.
I just sold some shares in Platinum Capital today at a premium to NAV. The manager has introduced a capital management program that should mean premia do not rise as high as they have in the past. So I thought it was time to sell a few shares.
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