Several weeks ago I opened up a good sized position in Gabelli’s GDL fund. Had owned a much smaller amount for a couple months. Thinly traded with only a $95.7 Mil asset base. Took hours to acquire the desired number of shares. The CEF is an arbitrage fund that skims small profits from pending or nearly completed mergers & acquisitions. It’s the tamest CEF Gabelli offers with a record dating back 15+ years and which I’d expect to outpace cash by a percent or two over longer periods. (Gabelli himself is reported to own a big chunk.)
Averaging in at $8.32, the fund has gone nowhere in the short time I owned it. Held steady around $8.32. Today’s the ex-dividend date (12-cents per share). While the fund opened lower as expected ($8.26) it quickly bounced to $8.35, well above its average price in recent days. I would not have expected it to go x-dividend and then jump in price over what it closed the day before - especially with the present Mid-East turmoil.
I really don’t understand the logic here in a fund jumping higher on ex-dividend date after the dividend has been declared / pulled out. It would make more sense for investors to be pushing the price up in the days before the dividend is declared. Would be instructive to better understand investor behavior & psychology is these matters.
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For GDL (high discount of 20%) that's involved in M&A arbitrage, there could be news related to one of its holdings. In looking at its portfolio holdings at M*, nothing jumped out, but I don't follow GDL in detail.
BTW, GDL has managed-distribution policy, so some of the distribution can be ROC (18.75% in 2024).
PS - I spoke too early. The CEF pulled back to $8.29 late morning, which makes perfect sense. I can’t account for the brief spike in price that was reflected on several different pricing platforms. But CEFs do behave in erratic ways!
For instance, how do you separate today's drop from the overall equity fall on ME events?
The war (Iran) seems out for a long run. Knee jerk in equities today. Little consequence for long term investors.
I tend to say away from thinly traded CEFs for the reasons described in this thread. I prefer CEFs with 6-9% distributions, at minimum $1B AUM, and 125,000 daily traded shares.
I’m aware CEFs are priced by sentiment and do not often trade at NAV. I owned 15-16 a month or so ago and commented proudly on my ”CEF basket” here a few times. Many of them were doing very well. But when I pulled up the 2008 performance (where it was available) I learned that several of my “hottest” ones had lost between 50% and 65%* in 2008 alone. So, I pulled back out of caution. At age 79 I’m not going to go chasing anything lower as I did in ‘08.
Still own 11 CEFs. Most are somewhat sedate and income oriented - even though I realize they aren’t the “hottest rods” on the block! BTW - GDL held up well in 2008 losing just 8%.
Yes - Best to avoid thinly traded holdings. Tough to get on the fire escape when needed!
* UTF is the one that lost 65% in 2008. Yet, I’ve come across well meaning financial articles describing the fund as an excellent “conservative” choice ”for older investors”. Obviously those writers hadn’t bothered to pull up its past performance.
At the time time, many CEFs relied on auction-rate preferreds (ARPs) for debt. These preferreds had weekly, biweekly or monthly auctions to reset their floating rates. ARP sponsors were to make last bids if other investors didn't show up at any auction.
Nice theory!
GFC was a debt crisis. Even big banks needed federal rescues.
First, investors didn't show up at ARP auctions to bid.
Second, ARP sponsors refused to make last bids.
Third, CEFs couldn't arrange any replacement of bridge financing and were in violation of their debt covenants.
Fourth, under the SEC regulations, several CEFs were forced to deleverage - i.e. sell at bottom prices. Results were just disastrous.
Now, the ARP financing has disappeared. CEFs rely on better and more stable financing now.
But the next crisis may show other problems.
I owned UTF for a while after the March / April selloff but sold it recently. No. I don’t think it will have another year like ‘08. I also like Cohen & Steers a lot. Still own 2 of their OEFs (RAPAX & LPXAX) plus FOF.
The NAV / Price is worth looking at among a dozen or so other things. M* provides some limited useful information as well. As with OEFs, most issuers have a website detailing the fund’s purpose / philosophy, holdings and past performance. Some CEFs have a termination date when they intend to dissolve, while others don’t. You might need to dig that up in the fund prospectus.
CEF Connect allows access to 20-year history (NAV & Price) once you locate the blue tab. I don’t own any Nuveen products but am greatful to them for providing this service.