Clough's Actively Managed CEFs Have Done Nothing in 12 Months

Includes: GLQ, GLV
by: Roger Nusbaum

Roger Nusbaum submits: A while back I wrote about the closed end funds managed by former Merrill Lynch Strategist Chuck Clough. Two of the funds have been around for a while now and appear to be really struggling.

click to enlarge
clough funds

The global allocation fund which trades as GLV has had a rough go NAV-wise. According to Yahoo Finance the NAV on December 12, 2005 was $24.00 and yesterday it was $23.71. During the year it paid dividends totaling $1.44. If I am figuring correctly the total return for the last 12 months was 5.9%.

The equity fund, GLQ, NAV appears to have had a total return of 10% over the trailing 12 months. In this post I am only talking about the NAV because that is the result of the fund's management. The market price takes in fear and greed and is beyond the manager's control.

I was not able to find the country allocations for GLV but ETFconnect had that info for GLQ. GLQ is 6o% US, 40% foreign. Using the top ten of GLV as a proxy the fund might also be 60% US, 40% foreign. So some comparison that includes both SPY and EFA is reasonable. The chart above, which may be skewed because of the dividend, shows a bad lag.

Both funds appear to be heavy in Japan which has not had a great year. It's tough to tell if the manager has just been unlucky or if the problem is more serious. The most recent shareholder letter includes a mea culpa and I seem to recall looking at a past letter that also had a mea culpa but I may be wrong about that.

The lesson here, for me, is that there is no great urgency to buy into a new product that is actively managed. Buying an actively managed product is really a display of faith in the manager and the strategy. There is nothing wrong with adding a little bit of track record to the faith. Where a CEF is concerned it also makes sense to wait for the premium to erode.