Anyone here follow this investment structure? They have obscene expense ratios but I have made money with them. I know not to buy at an IPO but afterwards certain strategies seem to provide good risk/reward attributes. As an example, In 2013 with fears of rising rates I was able to buy Doubleline’s Opportunistic Credit fund at a large discount. The strategy is similar to Gundlach’s total return fund but can take illiquidity risk and apply leverage. Retail investors chasing yield pushed premiums up through 2016 and I recently sold my holding at an 80% gain with a 4% vol over my holding period. Similarly, I bought CEFs that Gross managed after he left PIMCO and the structures traded down to a discount relative to NAV. I know these structures are driven by supply/demand in terms of pricing but I do think that you can smartly time entry/exit to take advantage of retail investors and their financial advisors who are simply yield hogs and often make uneconomic buy/sell decisions.
A more recent trade idea is buying Templeton’s Global Income CEF. Lead manager Haesenstaab has an impressive long term record through his global bond strategy in an open end fund but has really underperformed over the last 3 years. Underperformance has pushed what was a long term fund premium to a massive discount to NAV. I think his long term thesis is sound and I can purchase the exact same assets through a CEF structure at a 15% discount to NAV relative to an open end structure.
i know there is tail risk as CEFs trade down in risk off scenarios but for a long term investor these seem to be decent vehicles if you take advantage of discount/premiums at the right time. I trade these in an IRA so ST gains and income aren’t an issue and I can take a long term time horizon.
Anything I’m overlooking? I’m seeing opportunities in emerging market debt with a five year time frame as solid EMD CEFs (e.g. Stone Harbor and Western Asset) are trading at 20% discounts to NAV with a number of tailwinds to EMD including the effect of a slower than anticipated pace of US rate hikes and improving current account balances amongst a number of sovereign EMD credits.