FYI: Total private-equity capital hit an all-time high of $4.2 trillion in June, Fidelity says. As private-equity investing has grown, advisers have been increasingly interested private equity for their clients. “We've been thinking about what advisers need in private equity and how to create basic access tools to help them,” Mr. Gallagher said.
Regards,
Ted
http://www.investmentnews.com/article/20160429/FREE/160429911?template=printart

When you sell shares, you realize a capital gain or loss regardless of how you're paid (in cash or in stocks that Sequoia gave you instead). If you get stocks, their basis is what you "paid" for them, i.e. the value of the Sequoia shares you just traded in. So if you flip those stocks immediately, you have no additional gain or loss.
So where did the gain on the underlying stocks go? The general rule is when a company (such as a mutual fund) sells stocks it owns, it recognizes a gain or loss. It might sell stocks to raise cash for your redemption. Or it might "sell" you those stocks directly (redemption in-kind) to meet your redemption request.
But there's one special line in the tax code (IRC 852(b)(6)) that says this general rule doesn't apply to redemptions in kind for registered investment companies (mutual funds, ETFs). Poof! No cap gain - no gain passed through to you, no gain for the fund.
Your "on the other hand" description is right, but usually not as much of a problem as it might appear. If you've owned the shares awhile, your shares may have gone up 25% since you bought them, while the fund is planning a 20% gains distribution. If you were to redeem your shares, you would wind up recognizing a 25% gain, rather than get the 20% distribution. So you might grin and bear it - at least you're not recognizing more gain than you actually made with the investment. Expensive, but not really unfair.
Investors who held their shares for fewer years (say their share prices are up 15%) are the ones who would be inclined to sell. Otherwise, they would recognize gains greater than what they'd made in the fund. As you wrote, that means that more gains would be distributed to the remaining shareholders. So instead of a 20% distribution, the fund might wind up making a 23% distribution. Still not enough to induce you (with 25% share appreciation) to sell, but there could be a few other shareholders with 22% appreciation who would now decide to sell. Ultimately, an equilibrium point is reached.
All this assumes people are astute about their tax situations and act rationally. That's your laugh for the day.

One of the "complaints" investors were raising is that their larger ($250K+) redemptions were being paid in-kind. Just like an ETF. While it is quite likely you're correct about the existence of gains, it's not so clear that the gains have remained inside the fund (to be distributed this year).
I have no idea how to estimate how much gain was offloaded this way. Holding off (in a taxable account) is certainly prudent. It will be interesting to see how much in gains are left in the fund to be distributed to remaining shareholders.

Would not recommend it fora taxable account as they have a large capital gain that could be distributed . I would wait till next year.

@mcmarasco: First there are no dumb questions on the MFO Board. The yield is a bonus to the capital appreciation. Here is some more high income food for thought.
Regards,
Ted
http://www.marketwatch.com/story/yield-to-these-23-dividend-stocks-if-youre-looking-for-high-income-2016-04-21

@mcmarasco: If yield is a high priority with you, might I suggest individual stocks rather than equity mutual funds. The average so called dividend growth fund, or equity-income fund offer about half of what a quality stock dividend can yield. Two stocks that I own VZ and T yield 4.41% and 4.89% respectively and capital appreciation of 12.66% and 15.61% YTD.
Regards,
Ted

FYI: Weak consumer spending, Chicago PMI cast doubts on strength of U.S. economy.
Regards,
Ted
Bloomberg Slant:
http://www.bloomberg.com/news/articles/2016-04-28/dollar-torpedoed-by-yen-fed-inaction-asian-index-futures-mixed
Reuters Slant:
http://www.reuters.com/article/us-usa-stocks-idUSKCN0XQ1LU
MarketWatch Slant:
http://www.marketwatch.com/story/wall-street-to-eke-out-gains-in-the-cruellest-month-for-tech-amazon-soars-2016-04-29/print
USA Today Slant:
http://www.usatoday.com/story/money/markets/2016/04/29/stocks-dow-friday/83693134/
IBD Slant:
http://www.investors.com/market-trend/stock-market-today/bulls-find-few-places-to-hide-wal-mart-suffers-3-dent/
WSJ Markets At A Glance:
http://markets.wsj.com/us
Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Current Futures: Negative
http://finviz.com/futures.ashx

Recent discussions here brought up several reasons members decided to sell or hold FPACX. The large asset base of the MF and its big cash position seemed to push the sellers to their decision. I brought up the matter of Source Capital, the CEF now managed by Romick in concert with two members of the Crescent fund (the Contrarian Value team) and two FPA managers who run the FPA New Income Fund (FPNIX) according to a discipline known as AFI (Absolute Fixed Income). SOR after Romick, et al took over sold so much of the old manager's portfolio that a huge CG distribution was made in February. Now, my point: if an investor wants Romick without the huge asset base and the buckets of cash, SOR fits the bill. Right now, equity represents about 57% of assets, mostly US big caps, but some foreign as well. Cash and treasury notes make up about 11%, with the balance being managed by the AFI guys. AUM are now $337M. Romick's long-term record is exemplary, but the performance of the New Income Fund is really underwhelming. I don't know who has the final say on weighting of equity vs. fixed income. The CEF distributes about 4.5% (not guaranteed) and traded today at about a 5% discount. A long, Romicky discussion of SOR's statement of purpose can be found in the Annual Report (http://www.sourcecapitalinc.com/literature). Not a whole lot new from Romick, but it's as good a statement of what a new fund is supposed to accomplish as I ever see these days.

FYI: Jeffrey Gundlach, head of DoubleLine Capital, told Reuters on Tuesday that buying Treasuries after the recent sell-off makes sense. In fact, he said he’s buying some.
Regards,
Ted
http://blogs.barrons.com/incomeinvesting/2016/04/27/gundlach-start-legging-into-treasuries/tab/print/

FYI: U.S. stocks were mostly flat Tuesday, switching in and out of positive territory, as investors maintained a cautious stance ahead of several prominent tech earnings after the bell, including bellwether Apple Inc.
Regards,
Ted
Bloomberg Slant:
http://www.bloomberg.com/news/articles/2016-04-25/yen-gains-hit-japan-index-futures-as-u-s-crude-trades-below-43
Reuters Slant:
http://www.reuters.com/article/us-usa-stocks-idUSKCN0XN1KL
MarketWatch Slant:
http://www.marketwatch.com/story/us-stock-futures-rise-ahead-of-earnings-deluge-2016-04-26/print
USA Today Slant:
http://www.usatoday.com/story/money/markets/2016/04/26/stocks-dow-tuesday/83534756/
IBD Slant:
http://www.investors.com/market-trend/stock-market-today/stocks-quiet-ahead-of-fed-apple-tests-support/
WSJ Markets At A Glance:
http://markets.wsj.com/us
Sector Tracker:
http://www.sectorspdr.com/sectorspdr/tools/sector-tracker
Current Futures: Mixed
http://finviz.com/futures.ashx

Reference was made the other day to Source Capital (SOR) in regards to Mr. Braham's article in Barron's about CEF's. Steve Romick and his FPA team took over the fund in Fall, 2015. They must have done some real housecleaning of the portfolio resulting in a huge distribution to shareholders. Here's a quotation from a fund document "apologizing" for how long it took for the transactions to settle:
"Los Angeles (April 22, 2016) – Source Capital, Inc. (the “Fund”) is pleased to announce that the Agent for its Dividend Reinvestment Plan (the “Plan”), American Stock Transfer & Trust Company, completed its purchases of the Fund’s common stock for shareholders participating in the Plan with respect to the distributions announced on February 8, 2016. As you may recall, on March 15, 2016, the Fund paid the $33.65 long-term capital gain distribution combined with the $0.41 regular quarterly distribution announced on February 8, 2016. Due to the large combined size of these distributions and the commensurate number of shares that were required to be purchased for Plan participants, it took the Agent several weeks to complete the share purchases. The Agent will be posting the reinvested shares to your account by Monday April 25, 2016 and statements will be mailed shortly thereafter. Thank you for your patience."
I guess this is one way to deal with the persistent discount which averaged -9.57% for the past three years. It's now -1.69%. Fund price was a bit north of $65 at the time of the distribution. Now it's about $39. I wonder if SOR is going to be a clone of FPACX, albeit on a much smaller scale.

@kevindow You might want to check this one out; MLPs are kind of Simon Lack's thing:
http://www.sl-advisors.com/wrong-mlp-fund/

For those who follow MLPs closely, one of the enduring mysteries must be the mindset of investors in the Alerian MLP ETF (AMLP). Investors who desire MLP exposure but don’t want K-1s have been attracted to AMLP and a whole host of other inefficient ETFs and mutual funds. As we’ve written before (see, for example, The Enormous Misunderstanding About MLP Funds and Taxes), funds such as these convert the K-1s they receive into the 1099s desired by their investors by paying corporate income tax on their returns. The result is that an investor in a C-corp MLP fund such as this earns substantially less than the index – somewhere close to 35% less since that’s the portion ultimately paid to the U.S. Treasury.
[...]
The Mainstay Cushing MLP Fund (CSHAX) is similarly structured and invariably underperforms its benchmark. Portfolio Manager Jerry Swank was asked by Barron’s in June 2012 why the fund had lagged its benchmark since inception in 2010 and he replied, “As a corporation, what a mutual fund gives up is a tax drag on the net asset value, as much as a 38% tax drag on NAV.” CSHAX has an expense ratio of 9.42%, of which 7.94% is taxes. The questioner should have asked, ‘Can you really claim to put investors’ interests first if you design a vehicle like this?’ Instead she moved on, but really; who seriously expects a mutual fund to pay away almost 8% of its clients’ capital in taxes?
[...]
These securities and others like them (we calculate there are around $20BN outstanding) are deeply flawed. They exploit the unfortunate proclivity of many investors towards superficial research and while their shortcomings are disclosed in documents they’re certainly not understood by their investors.

You also might find an article he wrote in January to be enlightening re. how the various tax issues for these investment vehicles came to be. It certainly cleared up some lingering confusions I had.
http://www.sl-advisors.com/2015-mlp-crash-whats-next/

Interest rates are low not because of the fed because that is what the market wants. Hate to hear return to normal interest rates--these are normal interest rates because the market knows that the higher rates banks could get earlier were just subsidized by US taxpayers. If you want higher rates today you need to destroy housing just like before the 2008 crash the markets were saying if you want lower rates you will destroy the banks. See how labor benefits over capital in todays rate environment.

One area I have often pondered (for those who bought those CEF near 15-20% yields) is why so many advisors recommend selling for cap gains (once rebounded) rather than simply holding for the 15-20% yields they provide as long as tolerable? Inference is they will outperform the S&P going forward. You run the risk of reinvesting the proceeds in some form of losing alternative investment.

Steve Romick managing a second fund along with FPACX. Maybe another reason that FPACX has not done well of late.
One promising example is Source Capital (SOR), which has historically traded at nearly a 10% discount. Its new manager, Steve Romick of FPA Crescent (FPACX), widely regarded as a top investor, will retain some level of the fund’s historical 4.5% distribution to keep the discount manageable.

"Son, you have sinned grievously. Say 20 Hail Marys and contribute 20% of your ill-gotten gains to your Holy Mother Church."

http://www.sec.gov/Archives/edgar/data/102681/000116204416001738/valley497201604.htm
497 1 valley497201604.htm
[valley497201604001.jpg]
Valley Forge Fund, Inc.
TICKER: VAFGX
Supplement dated April 20, 2016 to the Prospectus dated April 22, 2015
The Board of Directors of the Valley Forge Fund, Inc. (the "Fund"), has concluded that due to the relatively small size of the Fund, it is in the best interests of the Fund and its Shareholders that the Fund cease operations. The Board of Directors has chosen to close the Fund and redeem all remaining outstanding shares on May 27, 2016.
Effective as of the date of this Supplement, the Fund will no longer pursue its stated investment objective. The Fund will liquidate its portfolio and will invest in cash equivalents such as money market funds until all shares have been redeemed. Any required distributions of income and capital gains will be distributed as soon as practicable to Shareholders. Shares of the Fund are not available for purchase.
Prior to May 27, 2016, you may redeem your shares, including any reinvested distributions, in accordance with the "How to Redeem Shares" section in the Prospectus. Unless your investment in the Fund is through a tax-deferred retirement account, any redemption is subject to tax on any taxable gains. Please refer to the "Taxes" section in the Prospectus for general information. You may wish to consult your tax advisor about your particular situation.
ANY SHAREHOLDERS WHO HAVE NOT REDEEMED THEIR SHARES OF THE FUND PRIOR TO MAY 27, 2016, WILL HAVE THEIR SHARES AUTOMATICALLY REDEEMED AS OF THAT DATE, AND PROCEEDS WILL BE SENT TO THE ADDRESS OF RECORD. If you have questions or need assistance, please contact your financial advisor directly or the Fund toll-free at 1-800-869-1679.
IMPORTANT INFORMATION FOR RETIREMENT PLAN INVESTORS
If you are a retirement plan investor, you should consult your tax advisor regarding the consequences of any redemption of Fund shares. If you receive a distribution from an Individual Retirement Account or a Simplified Employee Pension (SEP) IRA, you must roll the proceeds into another Individual Retirement Account within sixty (60) days of the date of the distribution in order to avoid having to include the distribution in your taxable income for the year. If you receive a distribution from a 403(b)(7) Custodian Account (Tax-Sheltered account) or a Keogh Account, you must roll the distribution into a similar type of retirement plan within sixty (60) days in order to avoid disqualification of your plan and the severe tax consequences that it can bring. If you are the trustee of a Qualified Retirement Plan, you may reinvest the money in any way permitted by the plan and trust agreement.
This Supplement, and the existing Prospectus dated April 22, 2015, provide relevant information for all Shareholders and should be retained for future reference. Both the Prospectus and the Statement of Additional Information dated April 22, 2015, have been filed with the Securities and Exchange Commission, and are incorporated by reference, and can be obtained without charge by calling the Fund toll-free at 1-866-869-1679.

Yeah I hear ya. Crazy stuff going on here as well - had a handful of days in the 70's and then back down below freezing for a week and now back up in the 60's. No climate change stuff happening around here don'tcha know. And yes, despite all the excellent advice I was given to sell my MLP's and invest in some decent bond funds I didn't listen and instead dove in head first and doubled down during the January lows. Now I'm sitting on these silly 40-50% gains that I don't know what to do with. Maybe I'll take a bath in the goo.
You too, be careful out there.

YTD gains in the CEF world are even more striking due to leverage and discount shrinking. many funds are up over 10%. looks like 2012 all over again in the fixed income spread stuff - loans, HY, EMD, structured credit -- all up more than equities. mortgages are modestly up too. volatility is down... i guess in the world of zero to negative rates, anything with an earned yield over 8% finally gets appreciated.

Some really big YTD gains in bond funds of all stripes and colors
-- Not RSIVX = 0.67 YTD