Dislocations in the financial services sector continue to give rise to new investment opportunities in closed end funds. With all of the turmoil in the banking and investment sector over the last twelve months, we expected the opportunity set to increase. Increase it has. Whether the motivation is cost cutting, avoiding activists or simply trying to reduce the discount at which a fund is trading, fund companies have been very active in initiating corporate actions for closed end funds they manage.

Recently, we have made investments for clients in closed end funds that are liquidating, merging with “sister” open-end funds and which are making cash tender offers. Typically, we are looking to make investments at attractive discounts to net asset value and then waiting for the completion of the liquidation, merger or tender, which usually take place at or near net asset value. While these investments are not without risk of loss if events don’t turn out as expected, we view them as excellent opportunities to potentially enhance already attractive returns available on corporate and municipal bond fund investments for the fixed income portion of our clients’ portfolios.

Jerry has been following closed end funds for many, many years and has put his experience into action over the last couple of months, replacing more passive fixed income investments with these very actively managed closed end fund investments.