Buying Closed-End Funds at a Discount

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 |  Includes: DSF, FOF, GCE
by: M F

Long term readers know I am a big fan of buying closed-end funds at discounts and selling them at parity. Closed-end funds are one of the least efficient areas of the market, and many can and do trade at very large discounts to their NAV. ETFconnect.com is a good resource here.

It was with great interest that a reader brought it to my attention that there is an ETN that invests in closed-end funds trading at a discount.
Fact Sheet for the underlying index here (pdf file).

Ticker Symbol is (NYSEARCA:GCE).

The average discount of the top 5 holdings is around -10%.

Cohen and Steers also has a closed-end fund of funds, the Cohen and Steers Closed End Opportunity Fund (NYSE:FOF), but it trades as a closed-end fund and can also trade at a discount (in effect getting a double dip). It got as low as about a -8% discount but is back to parity. Quant Investor had a nice article here.

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With the Dogs of the Dow on their way to their worst year ever, I wonder if it is a good time to put some money into the closed end fund that track the Dogs strategy (DSF) as it is trading at a -4% discount?

While we're on the topic of dividends, why do you think Siegel uses them in his Wisdom Tree funds? From his very good book "Stocks for the Long Run":

"But from a tax standpoint, share repurchases are superior to dividends."