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Cohen & Steers Closed End Opportunity Fund, Inc. is a closed end fund trading on the New York Stock Exchange under the symbol FOF. It is a closed end fund which only invests in other closed end funds. It presently sells at a 7.34% discount from net asset value as of March 26, 2012. On December 31, 2011 the discount was 7.35%.

Performance as of late has been as follows:

6 month's ending 12/31/11year ending 12/31/11
Market Value(7.17%)(0.34%)
Net Asset Value(7.24%)(1.02%)
Morningstar US All Taxable Ex-Foreign Equity Index(5.88%)0.68%
S & P 500 Index(3.69%2.11%

I think FOF is using the wrong benchmarks as much of its assets are in fixed income funds and buy/write funds. Its 10 largest holdings as of December 31, 2011, were as follows:

Closed End FundPercent of Assets
Gabelli Equity Trust3.0
Eaton Vance Tax Managed Buy-Write Opportunities Fund3.0
ASA Gold and precious metals3.0
Eaton Vance Tax managed Global Diversified Equity Income Fund2.6
Alliance Bernstein Income Fund2.5
AGIC Convertible & Income Fund2.4
Eaton Vance Limited Duration Income Fund2.4
PIMCO Income Opportunity Fund2.3
Clough Global Opportunities Fund2.2
Putnam Premier Income Trust2.2

The sector breakdown of the portfolio is as follows:

Covered call10.8%
Multi Sector08.0%
Equity Tax Advantaged07.6%
Master Limited Partnership07.6%
Senior Loan07.0%
U.S. General Equity07.0%
National Municipal06.5%
High Yield05.8%

FOF is a decent sized fund with net assets of $354,430,513 as of December 31, 2011. Percent ratios for the past 5 years are fairly good and are as follows:

ExpensesNet IncomePortfolio Turnover

As of December 31, 2011, FOF had net unrealized appreciation of `$17,651,871 and net capital loss carry forwards of ($147,975,030). This tax loss is more than 40% of FOF's net assets. This means that until the carry forwards begin to expire in 2016 through 2018, any realized gains by FOF will be tax free to its shareholders. If FOF does well, then in addition to a handsome return, the income will be tax free. I do not understand why it bothers to hold national municipal bond funds in its portfolio, when it pays no taxes.

My major objection to FOF is that it is using a shotgun rather than a rifle in making investments. I counted 168 different closed end funds in its portfolio. This is nearly 25% of all closed end funds in the universe. The portfolio should be narrowed and more focused. The portfolio is also unfocused and emphasis should be given to certain sectors rather than just being broadly diversified. The role of an investment manager is to make decisions, not to hold everything.

Disclosure: I am long FOF.