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.
I
Comments
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.
When in doubt go to the source. Click on Portfolio to pull up Rivernorth’s description of what the fund owns. Obviously Morningstar and Nuveen are characterizing as “stocks” what Rivernorth considers “debt instruments”. I’m not expert enough to tell you why one party considers them debt instruments and another calls them stocks. But I wouldn’t lose much sleep over it either. One way to think about it - A good company’s stock is probably safer to own than a poor company’s debt.
It’s not always ”black and white”. Preferred stocks, for example, behave more like bonds. Fidelity’s analytics lists them under “other” when I run a portfolio check. It’s interesting that RSF owns some of TRP’s High Yield Bond Fund (per CEF Connect) which would seem to be neither a stock nor a bond.
EDIT to add: I've settled on SPHY.
FWIW - CEFs are best bought in smaller quantities because of highly volatile nature. I hold 11 but (with the exception of GDL) each is only 1-2% of portfolio. Fidelity’s basket option facilitates such grouping. One possible advantage of owning a basket of conservative CEFs is that in a severe market downturn one might be able to swap some of them out for more aggressive / attractively priced ones. Pure conjecture, however. I also appreciate that while the CEFs are inside a Roth, the $5.99 monthly basket fee is pulled from my taxable account.
There are several CEFs or ETFs that hold a conglomeration of CEFs - not a bad choice. Some I’ve owned before: FOF, CEFS, CCEF, PCEF
Glad you found what you were looking for @Crash
dickoncapecod (read his bio) is an excellent resource, knowledgeable and helpful. There are also a number of other well versed posters. Hope you find it worth your time.
Note: the "CEF Holdings ---- June 2025" thread the link should take you to changes by the month should you decide to keep visiting.
I usually hold 10-12 CEF's in a mixture of equity and bond versions. I think that most people hold them for the income that is thrown off but as @hank may have mentioned the trick is to know when to buy or bail. Buying at a discount works most of the time for me but not always. Sometimes it's a signal that the fund has lost its mojo but not always. Also be aware that at some brokerages (Fidelity) distributions are reinvested at a 3-5% discount but not every CEF provider provides that on the platform.
I also follow (subscribe) to a service provided by Doug Albo (mostly equity CEF's) on SA. ADS Analytics is also a highly regarded resource there.