Today is Thanksgiving Day in the US and, working for an American firm, it’s hard to ignore, even though it’s not a public holiday here in the UK.
The precise origins of Thanksgiving are unclear, but it’s a time to give thanks for a bountiful harvest. So how does this relate to closed-end funds, I hear you ask.
In a previous article we cited the resurgence of interest that closed-end funds have seen in recent months and at the end of October, net inflows stood at more than GBP 1.9 billion in 2010. This compares with a net inflow of just GBP 560 million for the whole of 2009.
What has prompted this interest? Many factors have helped but it is one man that has been the driving force: Anthony Bolton. The fact he and Fidelity chose to launch his new China Special Situations fund as a closed-end vehicle, and not an open-end fund, has been a huge boon to the closed-end fund world.
That’s not to say it has been a perfect fund launch. Bolton’s two-year commitment at the start was a deterrent to many investors, particularly institutional, as two years is a short time period. We’re firm advocates of long-term investing and in a market such as China it’s especially important to take a very long-term view.
Bolton himself said in a recent interview that there will come a time when all investors will own a China fund and be surprised there was a time when most people did not. But that’s not going to happen overnight.
Our concerns at his tenure have been mitigated somewhat this month as Bolton has confirmed his commitment at the helm to April 2013. This statement comes ahead of the public offer for subscription and placing scheduled for January. The company has also allotted more shares from its block listing and this facility hasn’t yet been exhausted.
The fund has been trading at a premium to its NAV since June 2010, and there’s no doubt in my mind that a good part of this is due to Bolton’s reputation and proven track record as an excellent investor. The recent share issue and confirmation of Bolton’s extended commitment have helped to reduce this.
So what’s the connection between Anthony Bolton and Thanksgiving? I’m thankful he chose the closed-end structure for his new fund as without doubt it has reinvigorated interest in these vehicles. This fund alone has helped to harvest some GBP 460 million into the sector upon its launch, with subsequent additional capital raised through further share issuance. CEFs have languished in the shadows of their peers for some years now, but as we highlighted in a series of articles recently, they have much to offer, including superior returns with lower fees.
Like their open-ended peers, though, they have their share of turkeys too.
Happy Thanksgiving!