Closed-end funds research
data
Mid-1980s,New funds appear on the market at a premium（7%）and
move rapidly to a discount.(IPO百日后平均折扣10%) In the U.S.,
Cherkes, Sagi, and Stanton (2005) examine a much larger
sample of closed-end fund IPOs, over a much longer time period, than
Weiss (1989), and
find that the average time before a closed-end fund trades at a discount
is close to two years2年,a rate of reversion to discount that our model is
capable of creating.
over the period 1965-85 the(value-weighted) average discount on a
portfolio of major closed-end stock funds in the U.S. was 10.1%.
Though discounts are the norm,some funds sell at premia.in recent
years,premia have been most common for funds specializing in investment
in foreign countries. 仅新兴外国基金才溢价。fund.163
chinafund.cn
The component issues in one popular index of U.S. equity funds, the Herzfeld Closed-End Fund Average, traded at an average discount of 3.14 percent on March 13,1992. That's the smallest discount since the average was created in December 1987. Funds in the index have spent much of that time trading at double-digit discounts. Big discounts are routine in Britain. around 14%, according to the Association of Investment Trust Companies. The discount at the end of June 2005 was at its lowest for 9 years* at 8.2%, the lowest since January 1996, when the average discount was 7.7%.
The largest stock fund traded in the U.S.is the
Tri-Continental(2005年2b$多，has paid dividends for 61 consecutive
years) which holds diversified portfolio of common stocks. The year-end
price of Tricon has varied over the last 30
years from a
2.5%
to a -25%
to net asset value.
Tri-Continental Corporation (TY)，The Corporation's expense ratio is
0.64%
- a level that compares very
favorably to the expense ratios of counterpart funds. TY
double-digit discount
that has persisted since 1995. An interesting point is that a prior
survey revealed that as of 12/31/2004, 75%
of TY
shareholders that were surveyed were 65
or older.With TY, because of its
regular underperformance of the S&P 500,I feel that
TY
should be open-ended or liquidated.
when CEFs are terminated,either through merger, liquidation,or
conversion to an open-end fund,prices converge to reported net asset
value.
0. Brokers are a lot more interested
in hawking closed-end funds in their initial offerings than after they
start trading on an exchange. Provision: tender;Payout Policies
1. Agency costs. the funds charge a management fee,typically between
0.5 and 2.0 percent of the asset value annually.
2. Restricted stocks. the portfolio might be misvalued is if the fund
held large quantities of stocks which cannot be freely sold in the open
market.
3. Tax. if you buy a fund today and it realizes a large capital gain tomorrow,you must pay a tax even if you haven't made any money.Taxes
could not explain a discount of more than 6 percent.
4. Investor sentiment. The nine smaller deciles are negatively related.However,for the largest decile, the relationship is reversed.
The discount also depends on how much competition there is for
investors' money.
5. What about arbitrage?
Can't someone buy shares in a deeply discounted fund, then sell stocks
equivalent to the fund's holdings and lock in a profit? "That's what I
do for a living," Mr.Herzfeld answered. But it's not an easy living.
That works better in America than Britain, where there are limitations
on fund share buybacks.
The median fund in their sample sold at a premium of 47% in
the third quarter of 1929.伴随着巨量新基金发行。 The boom ended with the Great
Crash,as CEFs moved to discounts which have remained the rule since
then.
The new(Germany;Spain;Korea;Brazil),but not the old,country funds
have sold at large premia,sometimes above 100%. The discounts on
CEFs is "an expensive monument erected to the inertia and stupidity of
stockholders" Mispricing can occur because no riskless
arbitrage opportunity exists,and the supply of rational investors
willing to make long-term bets against the prevailing investor sentiment
is limited. Not surprisingly,the bids that succeed are typically for
95% to 98% of net asset
value. Closed-end equity funds, which represent
approximately one-third
of all closed-end assets, had their best year(2003) on record! An
astounding 40.62% in gains topped the previous mark of 38.44%
set in 1979. Once again, world markets were a major driver.Equity
discounts dropped from 10.1% to 4.1%—an incredible
600 basis-point move! Bond discounts meanwhile narrowed only
slightly from 4.5% at the end of 2002 to 2.9%(2003). As
of June 26, 1998, all the funds investing in countries which were part
of the Asian financial crisis have premia, while other country
funds have discounts. More specifically, CEFs invested in Indonesia,
Malaysia, Thailand, and Korea all were traded at huge premia. Indirectly
hit by the crisis, Japan funds were also traded at a premia. Russia was
another country with closed-end fund premia when it was in financial
difficulty. Cohen and Remolona (2001) also report that prices of those
country funds move from a discount to NAV before the crisis to a premium
when the crisis started, and the premia rose for all the funds during
the crisis and then the premia declined gradually or moved back to a
discount after the crisis in most cases. At the same time, all other
funds, no matter whether they invested in emerging or developed markets,
were all traded at discounts. Even those funds invested in Asian markets
such as Taiwan, China, Hong Kong and India, which were less exposed to
the crisis, were still traded at discounts.
From 1980 to 1998, the average discount on U.S. stock funds varied from about 0 to 20%, They find the average discount across all funds and over the time period of their sample is about 4%. Thompson (1978) notes that discounts in excess of “20% are quite frequent, with discounts exceeding 30% and 40% not uncommon.”
Equus II (EQS) is trading near a 25% discount--The $2.50 dividend was over 25% of the fund’s market price at the time of the announcement（06年1月）. I still wouldn’t buy shares in this fund because its expense ratio is very high, and its long-term performance has not been impressive.
54只封闭式基金公布的2005年年报数据显示，05年保险投资封闭式基金规模242．56亿份，相比2004年保险投资封闭式基金规模（296．92亿份）而言减少了54．35亿份，减少幅度为18．31％。
The Herzfeld Closed-End Average 12/31/99 /00 /01
/02 /03 /04 /05
Dow Jones Industrial Average 11497 10786 10021
8341 10453 10783 10889
Herzfeld Single-Country Average 2643 2258 2121 2113 3270 3744 4322*
The Herzfeld Closed-End Average 11977 12990 12562 9349* 12906 14935
15745*
Average NAV of Funds... 11660 12803
13183 9992* 13444 15191 16304*
Average Discount
-11.21% -6.17% -4.05% -6.09% -4.00%
+0.10% -3.85%
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