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.