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closed-end fund are selling at big discounts

The Wall Street Journal publishes every Monday a listing of closed-end funds (CEF), with their market price (MP), net asset value (NAV), discount (equal to (MP/NAV-1)). Currently the stated discounts for CEFs are very wide, more than -30% for many funds. This could be occurring because

(1) The reported NAVs of some funds may be overstated due to stale prices, especially in currently illiquid markets such as municipal, corporate, and especially mortgage debt. (2) Many investors in CEF are are disgusted with the performance of their funds, which have underperformed even their open-end counterparts (which themselves have plummeted) as discounts have widened, and they want or need to sell at any price.

Maybe some combination of (1) and (2) is true. If (1) is true, I wonder if the same overstatement of NAV is occurring in some open-end funds.

I am thinking of shifting some of my investments toward CEFs. Any thoughts?

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Reply to
beliavsky
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Great idea! I wonder how to quantify a CEF discount in a more timely fashion than etfconnect.com... or just find and graph one that roughly tracks an index?

But kind of dangerous, since even the open ended etfs don't seem to track now. Not only for the logical reasons you suggest, but seemingly for random craziness. I bought an openend near-SP500-index etf and got stuck with a sudden 24% spike of the price not connected with any SP500 rise. The brokers reversed the trade under orders of nasdaq for any premium over 20% over that period. I had a bond fund also give me a more modest unexplained spike. Here is a graph (which will only show properly today - Wednesday) where a 2x inverse fund failed reflect the underlying index by an insane percentage on Oct 9. It rose 60% in a couple days while something resembling the index fell much less than

20%
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-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
dumbstruck

Oh, it looks like etfconnect WILL let you sort CEF's by current discount. A spot check of the biggest discounted ones looks like their discounts are already shrinking from their extremes in September and may be almost returning to a norm of medium discounts according to my graphs.

Interesting to see a certain uniformity of what types of funds have big discounts, but they appear to be suffering a more long term problem that doesn't bode well for bounceback. I want to somehow ID CEFs with an only recent increase in discount that could at least have a chance of dead cat bounce (with a trailing loss sell order automatically hanging over it).

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
dumbstruck

Why other than the discount?

Many closed end funds are thinly traded. Also many, especially income funds, hold stuff from troubled financial houses - things which are essentially derivatives (of derivatives?). Note that in some cases the pay out may consist of significant return of capital

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
Avrum Lapin

For many closed end funds, if the ticker symbol of the traded shares is ABC, the ticker symbol of the NAV is XABCX -- the fund ticker with an "X" added before and after. Charting the NAV of the BLACKROCK CORPORATE HIGH YIELD ,

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it is apparent that the NAV trends, probably due to illiquidity ofmany of the bonds in the portfolio. One observes similar trendingbehavior in the NAV of the open-end Vanguard High-Yield Corporate fund
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. It may be worth waiting for the NAV to start trending upwards (as measured by a moving average crossover, for example) before buying such funds.

-------------------------------------- Misc.invest.financial-plan is a moderated newsgroup where Moderators strive to keep the conversations on-topic for financial planning. Other posting guidelines include a request for brevity and another for trimming posts to which we respond. For all of the other tips and suggestions, see "FROM THE MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the Newsgroup.

Reply to
beliavsky

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