Our guest author acamus recently wrote a report on Special Opportunities Fund (SPE) for our members. He thinks its a classic double-discount opportunity whereby the fund sells at a discount to NAV, plus the funds inside of it also trade at a discount.
A couple of key points from the report:
- With its substantial allocations to other funds, SPE looks like a fund of funds - and it is - but it’s more than that. In addition to investing in funds that the adviser believes offer good value, SPE is unique in that it employs activism.
Having made investments, the adviser doesn’t just hope those investments produce the returns they expect; they take action to increase the value of their investments.
After closed-end funds, the second largest group in the portfolio is Special Purpose Acquisition Companies (SPACs), which are another unique element of SPE.
What makes SPE valuable is its relatively low correlation to other asset classes.
The discount is currently more than -12%: historically wide for this fund, suggesting a reasonable entry point.
SPE pays its adviser fees equal to 1% of total assets annually with no performance fee.
Historically, SPE has paid one distribution per year, at year end, making it less appealing to income investors. That should soon change though.
We think SPE is a diversifier and source of uncorrelated returns because of its unique investment strategies.
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Disclosure: I am/we are long spe.