Joe Eqcome

iShares Chile ETF Outperforms Credit Suisse Chile Closed-End Fund

Gary,

While I agree with your basic conclusion, the difference in returns and variance may not be as great as you've indicated.

While not a material difference, and not changing your basic conclusion, I wanted to point out an important criterion for CEF investors is the adjusted returns for distribution and splits. This is important because of the yield nature of CEFs. Over a longer period of time it can be meaningful, particularly when compared to a non yielding investment. If you’re a trader, distribution become less meaningful.

On share price basis adjusting for distributions and splits, ECH is down 5.4% vs. down 10.2% for CH for the period sighted. (This is versus the -4.6% and -12%, respectively noted above.) This difference is due to the capital gains distribution paid by CH during the period of your chart.

Additionally, the adjusted index adjusted price standard deviation of each was fairly comparable (ECH: .13; CH: .14)

I’ve always enjoyed your work. Hopefully you’ll view this comment as additive for retail investors.

Joe Eqcome

CEF Fund Review: A Tale of Two Market Legs

Old Man

Thanks. MBB is a good find for the purpose of CEF US Mortgage fund type comparison. I'll add it to my list.

Joe Eqcome

On Apr 27 11:22 AM Joe Eqcome wrote:


On Apr 27 08:51 AM oldman wrote:

> MBB, an ETF for mortgage backed securites is positive.
>
> Performance As of 31-Mar-09 Get Performance for:
>
>
>
> MBB
> PERFORMANCE OVERVIEW
>
> Year to Date Return (Mkt): 1.53%
> 1-Year Total Return (Mkt): 7.07%
> 3-Year Total Return (Mkt): N/A
>
>

CEF Fund Review: A Tale of Two Market Legs

Alan Young

Thank you for your comments. I've always find them to be thoughtful, constructive and of value. The old adage that "better is the enemy of good" applies here.

Let me address your thoughts in reverse order.

You're correct regarding the difference in performance price change versus total return and that's why I'm careful to make sure I articulate on which the calculations are based. I mentioned "share price change" twice in the second paragraph and once in the title of the chart and "average share price appreciation" in the third paragraph. So, I'm doing my best to make sure that distinction is being made. Additionally, for shorter periods of time, I believe the distribution plays a lesser role on returns; moreover, it’s difficult to determine the components of distribution which might contain return of capital which would not be a true return on investment.

You're also correct on the observation that the data for CEF and ETF comparison is available in the article. I try to maintain a discipline of not more than two pages of text with charts. So, I’m always struggling for the correct balance with respect to data presentation. Since my initial goal was comparing CEFs among themselves over various short periods of time I was left with little space to compare them with ETFs--which I believe would be an insightful comparison.

Joe Eqcome



On Apr 27 10:39 AM Alan Young wrote:

> Joe, I like what you are trying to do, but I'm having a hard time
> following your analysis.
>
> 1. Rather than comparing CEFs in different asset classes, without
> context, it would be more useful to show CEF behavior in the same
> table as the corresponding ETF behavior over the same period— IOW,
> show for any given asset class whether CEFs performed better or worse
> than ETFs. Even though you may have the data here, it's hard to see.
>
>
> 2. Are your performance numbers based on price, or total return?
> Obviously there's a big difference when CEF distributions are yielding
> 10% or more over ETFs.
>
> Thanks...

The Chile Fund: A Play on a Nascent Global Economic Recovery

Alan Young

On a monthly basis I think you'll find that adjusted for distributions and splits that in fact ECH has underperformed CH since its inception.

If you indexed the adjusted prices of both ECH and CH for ECH's short operating history (Jan '08), CH is down 40% while ECH is down 46%.

Again, this is because a portion of CH's return is distributed to CH's shareholders over the period and is not reflected in its share price—yet still constitutes a return to the investor. I know this concept is a problem for rookies in this market segment and that's why I took pains to point it out in the article.

You can't effectively compare CEF returns with other stocks without taking into consideration distributions either through an adjustment, as I did in this case, or by comparing them on a total return basis.

Joe Eqcome






On Apr 22 10:50 AM Alan Young wrote:

> Chile is a good destination for investment. Hwever, CH under-performs
> the index fund ECH by about 10% annually. IMO the only reason to
> buy it is if you think the discount will be closing, giving a temporary
> price advantage.

Exercise Caution on CEFs This Week

Point of clarification: My remarks regarding caution in the upcoming week were specific to the Preferred Fund Type segment as opposed to the CEF market segment in the aggregate. I apologize for the lack of clarity on that point.

Joe Eqcome

Average CEF Declines 9.9% in Another Bad Week for Market

ETFDesk dot com

I agree CEFs are attractive for all the reasons you’ve mentioned.

Historically, sectors that have done well in the early recovery phase are: world equity, general equity, special equities (real estate, financials and commodities) and high yield funds. Given the severity of the current cycle, some of these sectors may not perform as well as in the last stock market recovery.

One common characteristic of CEF stock recoveries is that there is usually a compression of the discounts. (See report entitled: “CEFs Almost at Bottom: Discounts Approaching 1999 Nadir”) Discount compression is like a turbo charger to the general rise in the equity markets.

Using the criteria of a 20% spread between the current discount and the average historical discount, assets greater than $100 million, no auction rate debt, an expense ratio less than 1.5%, you get 5 CEFs. Two are General Equity funds (BLU & ZF), two World Equity funds (ESD & KF) and one High Yield fund (ZTR). So, based upon the discount spread theme, general equity, world equity and high yield would be some of the fund types that appear currently most attractive.

On a pure “gut basis” I’d be looking at the real estate CEFs. They’re washed out and trade at a discount on a discount (AWP).

I hope this is helpful.

Joe Eqcome (I own BLU, ESD & AWF)