Yup, and it's common to nearly all new closed end funds. The fund was an IPO in July of 2005. At that time, suckers, er, investors at full service brokerage firms, were pushed to buy it at a 4 1/2% premium. The shares were supported for a month or 2, then allowed to drift toward NAV. When the investors saw it falling 4 1/2%, they dumped it until it fell 20%.
This scenario is so common that I rarely recommended new closed end funds to my clients. This is one I might have recommended, but didn't for some reason. It had the hallmarks of a good one. Most notably, the competing closed end funds were selling at huge premiums. That's why I recommended some junk funds and some emerging market income funds. It has greatly outperformed its major competitor, on an NAV basis, not a share price basis, Duff and Phelps Utility Income. But Duff has the higher dividend and that is what sells these turkeys. And junk funds. And emerging market funds. And senior loan funds. So Duff only has a 3% discount. UTF is being punished for being safer than Duff. |
