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John Cole Scott

 
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  • What Does A Closed-End Fund's Leverage Actually Cost? Achilles' Heel Or An Investor's Salvation? [View article]
    W.Kirk, very good point. We plan to add that data to our system as well. My initial question was what is a normal amount of cost. Getting more detailed on the specifics will help us make better choices when we do see rates rise.
    Mar 26, 2014. 01:58 PM | Likes Like |Link to Comment
  • What Does A Closed-End Fund's Leverage Actually Cost? Achilles' Heel Or An Investor's Salvation? [View article]
    I will ask my data manage to see if he can consolidate the inferred leverage cost by fund sponsor. I think it should also be groups by Equity, Taxable bond and Muni bond as they have different leverage best practices. It will take a few days, but will post our findings here.
    Mar 26, 2014. 09:08 AM | Likes Like |Link to Comment
  • The Future Of Closed-End Funds: Yield May No Longer Be The Marketing Plan [View article]
    Janus had expressed some interest last year, we will see. Watch for N-2 SEC filings.
    Feb 17, 2014. 12:46 PM | Likes Like |Link to Comment
  • The Future Of Closed-End Funds: Yield May No Longer Be The Marketing Plan [View article]
    I think they meant that you cannot write options on CEFs vs. CEFs having about 30 funds that focus in some way on option writing as their investment strategy.
    Feb 17, 2014. 12:45 PM | 1 Like Like |Link to Comment
  • The Future Of Closed-End Funds: Yield May No Longer Be The Marketing Plan [View article]
    My opinion would be that ETFs are generally liquid (due to creation units and redemption) exposure vehicles. CEFs are far less liquid. The average CEF is $482M, and trade $1.25M a day in liquidity. 207 of the 594 (35%) trade under $500K a day in ave liquidity.

    They benefit from the fixed capital, often permanent leverage, about 80% of CEF leverage is structural or permanent. CEFs offer investors, mostly individual and smaller to mid-sized, patient investors, the opportunity to buy access to portfolio models that most $1B firms/funds would have no idea how to access. I believe that for 95% of ETFs/CEFs they do not compete as their structures offer different strength and weakness and they do not fill the same hole in a portfolio goal. Some people prefer ETFs, others CEFs.

    An article covered this concept last year, but I would argue it is not a fair apples to apples comparison. http://bit.ly/1chGXbz (Data from our 2/14/14 CEF Universe Data).
    Feb 17, 2014. 12:44 PM | Likes Like |Link to Comment
  • The Future Of Closed-End Funds: Yield May No Longer Be The Marketing Plan [View article]
    Yes, I agree that would have been a more accurate term.
    Feb 17, 2014. 12:29 PM | Likes Like |Link to Comment
  • The Future Of Closed-End Funds: Yield May No Longer Be The Marketing Plan [View article]
    FYI - Just for the record, from our CEF Universe data 2/14/14, NHF currently shows 0.86% is their cost of leverage (all 40 Act and permanent) and a 2.93% total expense ratio.
    Feb 17, 2014. 12:28 PM | Likes Like |Link to Comment
  • The Future Of Closed-End Funds: Yield May No Longer Be The Marketing Plan [View article]
    Guardian, a very fair point, but they were the #1 performing CEF in 2013 on a NAV total return basis which is net of fees. They are essentially a hedge fund inside a CEF wrapper. They are currently unique in the CEF space, not a typical Loan Fund. If you have a not already done so, read previous SA articles on NHF like the good piece by Fibonacci Sequence, or our published interview with Brian Mitts, their COO.

    Our position on fees is to pick the lower fee - if all other data is essentially the same, but to focus on NAV total return performance and NAV correlation to other CEFs to understand what they own and the value of the manager is far more important in my opinion. They have raised their dividend 4 times in the past year for a cumulative 30.9% dividend growth. That said this article was not intended to be about them, but my goals and hopes for the future of CEFs. I am hoping for some feedback on that part of the article.
    Feb 14, 2014. 12:05 PM | Likes Like |Link to Comment
  • How Municipal Bond Dividend Cuts Impact NAV Performance And Investor Sentiment [View article]
    Regarding BKN, we used the highest premium at the time as part of our comparison between how thing were far different between December 2012 and January 2014. As of January 31, of the 100 national municipal closed-end funds (excluding Build America Bond funds), 12 were at premiums to NAV, but only 4 above a +5% premium. With 88 CEFs at some level of a discount to NAV (January 31, 2014 from our CEF Universe data), I feel comfortable that we have plenty of options to make our investment selections without buying a fund at a premium to NAV.
    Feb 7, 2014. 12:06 PM | Likes Like |Link to Comment
  • Doesn't Look Like It's A Buy On Central Securities Corporation [View article]
    If you want timely data, most folks I talk to say M*/CEFConnect data is often very stale. I think and don't know it to be true (complete guess) that they keep the free public sites a little outdated in order to have a better reason to sell their data services for $5K-$10k+ a year to people that spend money on research and need more timely data. There is no excuse IMO to not check data on a few tickers from the fund sponsor when writing an article. If you are doing a piece of a large number of funds, then you may have to use the free website's data.
    Jan 25, 2014. 09:28 AM | 2 Likes Like |Link to Comment
  • Doesn't Look Like It's A Buy On Central Securities Corporation [View article]
    Try the Cornerstone CEFs, they are full of yield.
    Jan 25, 2014. 09:22 AM | Likes Like |Link to Comment
  • Doesn't Look Like It's A Buy On Central Securities Corporation [View article]
    Yes, it is small, I mentioned that in y comments. At about $318K a day in trading you will need to buy it over time if you choose to invest.
    Jan 23, 2014. 06:36 PM | Likes Like |Link to Comment
  • Doesn't Look Like It's A Buy On Central Securities Corporation [View article]
    I did wander way off topic (sorry Beta) as I was procrastinating another project. I am off tomorrow for a long weekend/out of town wedding, but will run some comp data on HIH/HMH early next week.

    I was not recommending HMH just trying to show a point from an educational perspective as well as a view heavily biased on who we have learned to research and trade CEFs. We mostly work with retired folks 60+ and the risk of a high premium fund collapsing is not work taking IMO. Now a hedge fund product with a different client base could take marginal short-term risk trading a fund like this. I think most people on SA are closer to group #1 than group #2.
    Jan 23, 2014. 06:30 PM | Likes Like |Link to Comment
  • Doesn't Look Like It's A Buy On Central Securities Corporation [View article]
    Betalyst,

    I am glad to see more articles on CEFs, but reviewing a CEF doesn't have to always look at it's market price yield, we argue that you need good market price total return. If I cherry pick a horrible investor experience in a CEF the past year, we can look at GNT. Market yield is 10.7%, expenses are 1.17%. That would fit you idea of high yield and moderate expenses. Of course, if you owned it the past year you would be down -19.8% and that includes dividends taken as cash. The fund's market price is down over -30% in the past year.

    I expect in the next 5 years there are more equity funds IPOed with negligible yields in the CEF structure than those that are. We think CEF Equity IPOs will push towards alternative investing. This would allow them to benefit from the fixed capital, leverage and investor liquidity. With the right manager and right fund sponsor, you could see numerous billion dollar IPOs in the space and not any real consideration for the market yield of the fund. Just my opinion and speculation based on conversations we have been involved with the past year.
    Jan 23, 2014. 01:34 PM | Likes Like |Link to Comment
  • Doesn't Look Like It's A Buy On Central Securities Corporation [View article]
    Just from and educational and non recommendation standpoint - I searched in our CEFU data for a fund in the HY space that I would suggest is more compelling has as little "discount risk" compared to PHT.

    I drew up a quick table to help make my point, but SA doesn't allow a graphic in the comments. A link can be found here:

    http://bit.ly/1dSiifN

    You can buy 32% more of HMH for the same dollar amount in your account, HMH is trading lower in it's own 52 week discount/premium range by about 30%. This is a one-year peak to valley for the fund. With HMH you lose -0.5% 1 year NAV total return when comparing PHT to HMH.

    HMH has 0.8% more market yield, +10% more dividend coverage from reported earnings. The manager at HMH has to blend 7.3% vs. PHT's manager has to blend 9.3% to meet current dividend policy (we call this leverage adjusted NAV yield). MHM has only +1% more leverage. HMH has a duration of 3.29, which is 0.47 higher than PHT. HMH has 1% more HY bonds in the portfolio, -12% less US exposure and 8% more non US exposure.

    PHT has a few positives. I have nothing against the manager or the actual portfolio holdings and NAV performance. It is 4X more liquid then HMH which is nice. But, if the fund or the perceptional value of the fund ever changes ... which could come from market sentiment, a dividend change (I don't see it happening anytime soon, but both funds could cut their dividend at any point) I see more risk and reward.

    If a cut occurred, it could send HMH (based on past market reactions) to a -1% wider discount. A cut could send PHT to a -20% wider discount (b/c of the high premium). For those that have portfolio stops to protect them, look when AOD/AGD cut their dividend a year ago. The press release was after 4pm on the Friday before the MLK holiday weekend. AOD closed on Friday at $4.28 on 577K shares traded. It opened Tuesday at $3.85 and closed at $3.93 with 7,286K shares traded(12.6 times the previous days volume). This shows a -10% loss if you had exited on the open and AOD was already at a -8% discount.

    I think this is a tail risk that I choose not to live with. We find most investors or advisors don't seem to realize all the factors involved. If you read this and disagree with me, that is your choice. Happy to have any comments or questions.
    Jan 23, 2014. 12:57 PM | 1 Like Like |Link to Comment
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