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Duff & Phelps Utility & Corporate Bond Fund (DUC), A Closed-End Fund, Is Ripe For Liquidity Event To Eliminate Its 8% Discount

|About: Duff&Phelps Utility&Corporate Bond Trust (DUC)
Summary

Activist investor Karpus Management owns enough shares of DUC, along with potentially sympathetic institutional investors, to pressure DUC to liquidate or convert to an open-end fund.

Liquidation or open-ending would eliminate the current 8% discount of DUC’s shares.

Based on the notice deadline of September 24, 2019 for annual meeting shareholder proposals for DUC, Karpus' notification is likely to be in early Fall of 2019.

Karpus Management specializes in accumulating large positions in shares of closed-end funds, the shares of which are selling at a discount to net asset value. A group of similar minded institutions independently invest in the same closed-end funds with the goal of accumulating a control position in the fund. When they have done so, Karpus pressures fund management to liquidate the fund or convert it to an open-end fund. Where, as here, Karpus and similar minded institutions own an absolute controlling interest in the fund, they will be able to cause the fund to liquidate or convert to an open-end fund. Doing either will completely eliminate the fund’s discount, to the profit of shareholders.

Activist actions almost always take place at fund annual shareholder meetings. The notice deadline for shareholder proposals to be included in DUC’s proxy material for its 2020 annual meeting is September 24, 2019. I expect Karpus to provide its notice to DUC prior to that time. Investors can invest in DUC today with the strong possibility of obtaining DUC’s return now and an additional 8% return when DUC’s discount is eliminated.

DUC invests primarily in investment grade debt securities and has a duration of 3.2 years. It's current distribution rate is approximately 4.8%.

Disclosure: I am/we are long DUC.