Joe Eqcome

CEF April Monthly Review: Real Estate Funds Rock

Oooopps....

Transposed Berkshire Hathaway ticker symbol in comment. Correct symbols should be: BRK.A & BRK.B

Joe Eqcome

On May 04 09:51 AM Joe Eqcome wrote:

> Alan Young
>
> You're correct that BIF is not a real estate related CEF. What I've
> try to do in these weekly reviews, in addition to provide an overview
> on the CEF market segment, is to also provide an investable idea.
>
>
> I thought that BIF might be some of interest as it has been brought
> to our attention by Dan Plettner in this blog. It’s my intention
> to do some more work on it and for other who might contribute provide
> some feedback.
>
> Reason for my interest in BIF is: trading a significant time weighted
> historical discount; has a large position in Berkshire (seekingalpha.com/symbo...);
> has a significant slug of cash. Dan is raising investors’ consciousness
> regarding actions that management might take do to close the discount
> gap. For these reasons I think it may be worthy of further analysis.
> (For the purpose of disclosure, I own a small holding in BIF and
> may increase that position. While I’m happy to risk my own capital
> on an incomplete idea, I don’t think it is fair for other people
> to do so until the idea can meet the more rigorous criteria.)
>
> I thought it was worth of note but short of a recommendation as I'm
> still accumulating info.
>
> Thanks for your comments.
>
> Joe Eqcome
>

CEF April Monthly Review: Real Estate Funds Rock

FAMCO

Your observations regarding the lack of an impartial advocate for retail CEF investor is both a true and sad commentary. Even when the brokerage firms had CEF coverage it was significantly biased; it was no more than a marketing tool for CEF IPO’s than independent research. Remember, the CEF industry is dominated by a few large fund sponsors who are likely to do “one off” funds. If you were an underwriter, you’d want to nurture the sponsor as they provided a nice steady stream of investment banking fees through a variety of CEFs develop by the sponsor.

Additionally, the Closed End Fund Association (CEFA) is financially supported by the CEF sponsors. So, while CEFA provides decent information on the CEF market segment, as provided by Lipper, it can’t provide independent research. This is not a criticism of CEFA, just a fact.

As it relates to BIF, if management is not maximizing the value of the CEF for the benefit of its shareholders’—as Dan suggests, then we should collectively apply pressure to have the policy or management changed. Whether Dan’s appeal will fall on deaf ears will be a function of the strength of his argument. It’s something which I’m going to spend some time looking into. (As a point of disclosure, I do own a small holding of BIF and I’ve had e-mail exchanges with Dan.)

Joe Eqcome



On May 03 10:33 PM User241885/(FAMCO) wrote:

> Maverick's question about the closing gap on NAV discounts on buy/write
> funds may have to do with the huge per-centage distributions as the
> year end sell-offs pushed yields in to the high teens. There is little
> or no brokerage sponsorship left so even the quality non-leveraged
> names like Eaton Vance languished.
>
> The press did not pick up on this until the end of the winter and
> with retail clamoring for yield, demand finally stirred up. It is
> ironic as the data suggests that option selling of funds are the
> ones that most steadily experience NAV erosion over time.
>
>
> Dan Plettner's crusade with BIF reminds me of the horrendous situation
> at the Seligman funds where the entire family funds during were in
> the bottom percentiles of their categories consistently throughout
> the great run of the eighties and nineties. In spite of the fact
> of high fees, bad performance, continual bashing by the newsletter
> writers and personal financial journalists, management still held
> on through the decade.Does anyone know what happened to that family
> of funds?
>
> It would not surprise me if the experience with BIF takes a similiarly
> lengthy course. The actual history of "open-ending" closed end funds
> has not been one characterized by overwhelming shareholder victory.
>
>
> Having said that, I wish Dan the best of luck. The lesson of the
> last few years is that shareholders deserve better.

CEF April Monthly Review: Real Estate Funds Rock

Maverick

Your observations matches the numbers in my database.

Opt/Arbitrage funds are classified in the “OtherFnds” category. There are 29 "OtherFnds" in my data base of which are 12 are classified as “Opt/Arbitrage”. Those 12 Opt/Arb funds are trading at a flat prem/discount (-0.6%) as of May 1st. Five of the 12 are trading at a premium (7.5%) while the balance at a discount. The greatest discount of the group is Nicholas-Applegate Intl Prem & Strategy Fund (NAI) at a discount of 15.8%. Don’t know much about this CEF. Do you have a view on NAI?

Joe Eqcome

On May 03 12:05 PM mavericks wrote:

> Wondering what category buy/write (call option writing) equity CEF's
> fall into? Many have gone to low single digit discounts if not absolute
> premiums! Saw the same thing happen in Jan. and we all know how that
> turned out.

CEF April Monthly Review: Real Estate Funds Rock

Alan Young

You're correct that BIF is not a real estate related CEF. What I've try to do in these weekly reviews, in addition to provide an overview on the CEF market segment, is to also provide an investable idea.

I thought that BIF might be some of interest as it has been brought to our attention by Dan Plettner in this blog. It’s my intention to do some more work on it and for other who might contribute provide some feedback.

Reason for my interest in BIF is: trading a significant time weighted historical discount; has a large position in Berkshire (BKR); has a significant slug of cash. Dan is raising investors’ consciousness regarding actions that management might take do to close the discount gap. For these reasons I think it may be worthy of further analysis. (For the purpose of disclosure, I own a small holding in BIF and may increase that position. While I’m happy to risk my own capital on an incomplete idea, I don’t think it is fair for other people to do so until the idea can meet the more rigorous criteria.)

I thought it was worth of note but short of a recommendation as I'm still accumulating info.

Thanks for your comments.

Joe Eqcome



On May 03 03:05 PM Alan Young wrote:

> Good article, although the last paragraph on BIF is non-sequitor
> (since BIF no longer holds an appreciable amount of real estate).
>
>
> Personally, I am much chagrined to have missed this run-up. I was
> early to spot REITs as oversold and bought while they were still
> falling; early to cash in when they started bouncing back; and now
> maybe too late for what's left of the bounce. OTOH, a healthy does
> of panic could still return to this sector--it certainly is riddled
> with problems, and it's not a sure thing that TALF will cover them
> all.

CEF April Monthly Review: Real Estate Funds Rock

JSE17

I agree that commercial real estate securities may be ahead of themselves given their significant recent run-up. No need to chase them here as there are still significant pending issues.

Thanks for the encouragement.

Joe Eqcome


On May 03 09:44 AM jse17 wrote:

> Your work is appreciated Joe!
>
> It may be at or near the time to sell the high flying REIT CEFs and
> buy with 90% or so of the resulting capital, VNQ.