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The Herzfeld Caribbean Basin Fund aims to invest in Cuba’s future economic and political liberalization.
AFP/Getty Images/Yamil Lage
Closed-end funds have traditionally been dominated by individual investors. Individuals or their advisors primarily trade them in the secondary market after they are pitched to retail in their initial public offerings. Few CEFs attract institutional investors, owing to the fact that most are modest in overall size and trade in small quantities, limiting their liquidity. This is a critical factor for organizations that may need to buy and sell in multimillion-dollar amounts, significantly larger than most people trade in.
As a result, the CEF market is inefficient, which means that fund prices may differ from their intrinsic values. Traders in completely efficient markets would immediately jump on such anomalies, buying low-cost funds and selling high-cost ones. Given significant disparities between bid and ask prices for just tiny amounts of stock in many circumstances, that is not the case in this sector. Despite this, a few CEFs manage to pique institutional interest. A Barron’s search yielded an eclectic mix of funds from a range of industries. The following are a few instances of equity CEFs.
Aberdeen Total Dynamic DividendAOD39.50% -8.96% Aberdeen Total Dynamic DividendAOD39.50% -8.96% Aberdeen Total Dynamic DividendA
6.79 percentage point
CBRE IGR27.48-7.696.67 Clarion Glb Real Estate Kayne Anderson Energy InfrastructureKYN21.38-10.038.3Kayne Anderson Energy InfrastructureKYN21.38-10.038.3Kayne Anderson Energy InfrastructureKY EXG18.84-1.367.26 Eaton Vance Tax-Mgd Glb Divrsd Carribean Basin Herzfeld CUBA17.30-11.3210.03 Premier Properties in Aberdeen, Glb AWP16.74-5.477.31 Sources: Fidelity, cefconnect.com, and the websites of the funds.
The group with the most institutional interest was at the top of the list.
Aberdeen Total Dynamic Dividend (Aberdeen Total Dynamic Dividend) is
fund (ticker: AOD), which invests in large-capitalization stocks around the world, with little under half of its holdings in the United States. Several of them also concentrate on what are known as alternative asset classes. The
Clarion Global Real Estate Income CBRE Clarion Global Real Estate Income
The fund (IGR) is mostly made up of real estate investment trusts, with a little more than half of its holdings in ordinary stock in the United States, 11% in preferred stock in the United States, and the rest in international investments. The
Global Premier Properties in Aberdeen
The fund (AWP) also has real estate investments all around the world, with 56 percent in the United States. The
Energy Infrastructure by Kayne Anderson
The KYN fund focuses on master limited partnerships, such as those that operate significant pipelines. The
Eaton Vance Global Diversified Equity Income is a tax-managed global equity income fund.
To generate current income, the fund (EXG) has a worldwide large-cap stock portfolio, with around 54 percent of the assets situated in the United States, and an options-writing overlay equivalent to little under half of the holdings. Finally, there is the
Caribbean Basin Herzfeld
CUBA is a one-of-a-kind investment vehicle. The fund aims to invest in an eventual opening up of Cuba’s economy, as its ticker symbol suggests. The CEF jumped 2.6 percent earlier this week in response to protests in Cuba over the country’s deteriorating economy, which has been exacerbated by the Covid-19 outbreak. In a telephone interview, Erik M. Herzfeld, president of Thomas J. Herzfeld Advisors, said, “There is a wall of money waiting to invest in Cuba once it is legal.” The firm also serves as the fund’s manager and is the largest holder of the fund for its clients. Its most valuable asset is
MasTec
(MTZ), a Florida-based infrastructure development firm. As is customary, these screens serve as a beginning point for investors looking for new ideas. You’ll also find some company among professional institutional investors in these names. Randall W. Forsyth may be reached at randall.forsyth@barrons.com./n
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