Sapphire

Exploiting CEF Market Sector Inefficiency with FOF

Joe - thanks for your reply. I do like the funds and their allocation in FOF; in fact, I sometimes look at the individual holdings in FOF and compare them to mine to evaluate my own choices. My impression, after researching many closed end funds myself, is that FOF's manager is a good one who knows his stuff.

I have really enjoyed learning more about closed end funds and choosing my own, as I find it a very interesting asset class. But for those who don't have the time or inclination to do this, I think FOF is a good vehicle with less downside risk than many individual closed-end funds out there. It will be interesting to see how it performs long-term.

Thanks for the article -

Sapphire

On Jul 26 08:45 PM Joe Eqcome wrote:

> Sapphire
>
> I applaud the fact that you did your own research and pick out a
> portfolio with which you are comfortable. Kudos!
>
> To the extent that FOF is trading at a 3.7% discount and FOF’s management
> fee is around 1%, you’d have approximately a four year payback period.
> So, if you wanted to own the shares for less than 4 years it might
> be appropriate.
>
> The other issue is the cost of trading. When you buy FOF, depending
> on the amount, you will usually pay a single commission fee. For
> most on-line brokers is less than $10. If you buy 20 individual stocks
> you’ll be paying the equivalent of $200 for the portfolio. So, this
> is a cost to be considered.
>
> For someone like yourself, doing the research and picking your own
> stocks is great way to learn about the CEFs and empowers you to learn
> more.
>
> I hope this is helpful.
>
> Joe Eqcome

Exploiting CEF Market Sector Inefficiency with FOF

Hi Joe,

I looked at FOF, but opted instead to diversify into about 20 closed-end funds that I chose myself. I notice that the funds I picked are also within FOF's portfolio. However, I think I got them at better discounts and therefore a much better overall yield than FOF has been paying, particularly considering the heavily discounted prices many popular CEF's were selling at earlier this year. Others who do not wish to do this much research, monitoring, and juggling may find FOF a fairly safe alternative way to diversify into a number of CEF's, however.

One concern I had is since FOF charges a management fee, as do all the CEF's in its lineup, could not the discount - which is small at this point - be negated by a "fees on top of fees" issue?