Unlocking Value

Interestingly, according to Bloomberg (10 April 2024), the average discount-to-NAV for all closed-end funds (more than 420 in the US) is ~6.5%, according to John Cole Scott at Closed-End Fund Advisors. China Merchants China Direct Investments has a long way to catch up.

据《彭博》（2024年4月10日）报道，根据Closed-End Fund Advisors的John Cole Scott ， 目前美国超过420个封闭式基金的股价较资产净值（NAV）平均折扣率为大约6.5%。招商局中国基金的折扣率远远高於這水平。

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10 April 2024

Source 来源：Bloomberg

By Yiqin Shen and Katie Greifeld

A Saba Capital Management actively-managed ETF tracking the closed-end fund industry is loading up on equity-focused products that the firm says offer some of the largest discounts and compelling risk-adjusted returns.

About 45% of the $184 million Saba Closed-End Funds ETF’s (CEFS) portfolio is currently invested in stock-focused vehicles, with those buying municipal debt coming in second. That’s a shift from its historical setup — the ETF has typically invested in funds that purchase fixed-income assets, high-yield funds, in particular since its 2017 launch, according to Leah Jordan, a Saba managing director and product specialist.

“The reality is we go to where the ball is, we go to where the opportunity is,” Jordan said on Bloomberg Television’s ETF IQ Monday. “More recently, the discounts have been in the equities and the muni space, so that’s where we are going to target our efforts.”

Closed-end funds are publicly-listed investment products with a fixed supply of shares, which means they can, and often do, trade at wide dislocations to the value of the assets they hold. Saba, an activist hedge fund led by Boaz Weinstein, has spent years and billions of dollars buying up products trading at steep discounts and then pressuring managers to close the gap via tender offers and other means.

While CEFS doesn’t initiate activism, the ETF often stands to benefit from Saba’s campaigns, Jordan said. The ETF has climbed 65% on a total return basis over the past five years, outperforming the passively manged $750 million Invesco CEF Income Composite ETF (PCEF)’s 25% return — though both trail the S&P 500’s performance.

The average discount for all closed-end funds — more than 420 in the US now — is around 6.5%, versus a 25-year average discount at 4.5%, according to John Cole Scott at Closed-End Fund Advisors. Equity funds currently trade at an average discount of around 7%, muni funds at roughly 10% — both higher than their historic average, data show.

Saba has ramped up campaigns against some of the closed-end fund industry’s biggest money managers in recent months, including BlackRock Inc. Saba has urged fund sponsors to take steps like buying back shares, making tender offers, liquidating assets or open-ending funds to return value to shareholders and collapse the discount.

“In some cases, that will happen just through trading,” Jordan said. “But when that doesn’t happen, Saba has a repeated track record of being able to do that by force.”