Roger Nusbaum (wish list) submits: Barron's had an interview (sub. req.) with Chuck Clough, former equity strategist from Merrill Lynch. Since leaving Merrill he hung his own shingle at Clough Capital Partners in Boston. Chuck also runs two closed end funds -- Clough Global Allocation Fund (NYSEMKT:GLV) and the recently listed Clough Global Equity Fund (NYSEMKT:GLQ).
I did a little looking under the hood and these are kind of interesting. First things first, Clough is clearly a sharp guy and given what he has done in his career I'm sure I will never know as much as he knows.
The funds may be difficult to own for a couple of reasons. First I'm not sure why there are two funds. They both seem very similar. The difference in performance seems to be attributable to the fact that GLV trades a large premium to NAV but GLQ trades right at NAV (give or take). The funds each have similar yields. In looking at the holdings of each fund there is a fair bit of duplication too.
And about the holdings; GLV has about 190 equity holdings plus 6 ETFs, it also sells short and does a little with options. GLQ has about 200 equity holdings, 10 ETFs, 1 CEF and does some things with options. I can't guarantee the 190 and 200 as exact but it's close.
There is a fair bit of turnover (not unreasonable) which makes knowing what you own, for your own allocation purposes, very difficult. As changes get made in the fund in reaction to changes in his outlook the fund may look very different six months from now than it does today.
I also don't understand the dividend -- its huge. The yield of both funds is in the fives. The dividend paid is not necessarily all dividend. According to the Clough website it may include capital gains and return of capital. The fund will breakdown the composition of the payout at year end. I'm not sure why a return of capital is a good idea. Closed End Fund Association shows that GLV is about 31% leveraged so that could be how they keep the dividend too. GLQ does not show up on the list but it may be leveraged nonetheless.
To get a feel for how GLV has done, it was priced on July 27, 2004 with an NAV of $19.06. On Friday the NAV closed at $22.99 which is a gain since inception of 20.6% plus dividends. In that same time the S+P 500 has gained 13.9%. Since the fund has about 40% in foreign it might be worth noting that EAFE is up 29.7%. The S+P and EAFE blended together proportionally was up 20.24% (if I counted correctly) so the fund added a little price appreciation and a lot of dividend.
An actively managed fund (closed end or otherwise) with such a wide universe probably has no role in a top down strategy but for a bottom up approach either fund could be very solid. Since the two seem so similar (double check and draw your own conclusion) it probably makes more sense to pick the one trading at NAV, GLQ. That is if you have any interest in buying Chuck's portfolio management.
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