Yes, you read me; It’s rare to run into these situations. Efficient-market theorists would promptly point out that the title is not possible, I’d rather be the lucky one who picks up the bill.
Closed-end funds are a dying breed, they used to be highly popular on both sides of the Atlantic. For numerous reasons, this is no longer the party field for investors (Pershire Square’s CEF is an exception).
I am bringing up three granddaddies of the CEFs today, I question the age discrimination logic (or whatever discrimination logic) that the market places upon them:
| Name | Ticker | Adjusted NAV | Price | Fee | Discount to NAV | Inception |
| Canadian General Investments | CGI.TO | 68.5 | 40.47 | 1% / 2.19% (if counting leverage cost) | 41% | 1930 |
| Economic Investment Trust | EVT.TO | 251.8 | 174.35 | 0.25% | 31% | 1927 |
| United Corporations Limited | UNC.TO | 206.0 | 130.01 | 0.55% | 37% | 1929 |
TL/DR: Buy these three over index funds / or any other retail funds!
Ok, for the latter two, I’d direct you to here and East 72’s write-up. EVT is a semi-concentrated fund in a handful of Canadian names (54%) and the rest in global equities; UNC is a very diversified global equity fund. Both have fascinating stories, which I won’t expand on here.
On CGI, it’s run by the boutique manager with a PM who’s been at this game for a long time, I’ve linked the pic just in case you are curious 😉 Joking aside, the portfolio speaks to the quality.
All three possess the following things making them attractive in addition to the salivating discounts offered by Mr. Market
- Meaningful insider ownership
- Satisfactory long-term net return records (I’m looking at 50 years)
- CGI: 11 – 12%
- EVT: ~10 – 11%
- UNC: ~8%
- Low fee
Worst Case:
You pick up this $100 bill growing at 8 – 12%, but you only paid ~$60 to 70. Say you hold these to the judgment day, the returns will look somewhat similar to the above records, but you enjoyed 15 – 35 years of the free management fee (factoring in the portfolio growth), this is still better off than investing in regular retail funds.
Not Worst Case:
Collectively, we are looking at ~$1.8 – 1.9B “value”/”mispricing” to be realized here (and this $$$ amount is growing as the underlying portfolio grows) by some sort of events happening down the road. Like: majority holders take things private – judging on their current ownership, they could realize an $800 – 900M uplift on their holdings now; activists play the disgruntled minority shareholders role and ask for redemption events; and structural changes
As someone who believes in the merits of a capitalistic society, I’d put down some probability % on the above. The sooner the event/events happen, the higher your IRR would be.
Conclusion
This is a simple idea; There are more colors/backgrounds/stories behind but the above covers the essence.
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information is presented “as is”. Investors should consult multiple sources of information when analyzing investments. Investments may lose value. Investors should use proper diversification and maintain appropriate position sizes when managing their investments.
