A while back I wrote about the closed end funds managed by former Merrill Lynch Strategist Chuck Clough. Two of the funds have been around for a while now and appear to be really struggling.The global allocation fund which trades as GLV has had a rough go NAV-wise. According to Yahoo Finance the NAV on December 12, 2005 was $24.00 and yesterday it was $23.71. During the year it paid dividends totaling $1.44. If I am figuring correctly the total return for the last 12 months was 5.9%.
The equity fund, GLQ, NAV appears to have had a total return of 10% over the trailing 12 months. In this post I am only talking about the NAV because that is the result of the fund's management. The market price takes in fear and greed and is beyond the manager's control.
I was not able to find the country allocations for GLV but ETFconnect had that info for GLQ. GLQ is 6o% US, 40% foreign. Using the top ten of GLV as a proxy the fund might also be 60% US, 40% foreign. So some comparison that includes both SPY and EFA is reasonable. The chart above, which may be skewed because of the dividend, shows a bad lag.
Both funds appear to be heavy in Japan which has not had a great year. It's tough to tell if the manager has just been unlucky or if the problem is more serious. The most recent shareholder letter includes a mea culpa and I seem to recall looking at a past letter that also had a mea culpa but I may be wrong about that.
The lesson here, for me, is that there is no great urgency to buy into a new product that is actively managed. Buying an actively managed product is really a display of faith in the manager and the strategy. There is nothing wrong with adding a little bit of track record to the faith. Where a CEF is concerned it also makes sense to wait for the premium to erode.
7 comments:
Roger, please explain why you don't think the Canadian energy trusts like CNE are a good risk/reward play AT THIS POINT. Some of them are trading below book value with 15% dividend yields. Thanks.
My thoughts are very top down here. I was told a long time a go that when yields for a product are too high relative to prevailing rates, that one product is very risky. They yield compensates for risk or attempts to anyway.
My opinion is not fundamental, I have no idea if they should be bought here or not I just know what has kept me away and I am not bailing on the notion.
Roger, Can you suggest a list of cef's that are related to emerging markets. I went to seeking alpha..has some bogus funds and missing others, and morningstar...fairly limited. Just trying to develop a short list to watch, when and if, of course they will, correct. Like you say, pays to monitor strategy, price, and premium. Any suggestions of your own would be welcome.
I'm sorry but I don't watch any actively managed broad based EM CEFs. Some clients own IIF but that is a narrow product.
For a broad product I prefer ADRE (client and personal holding), EEM and VWO are a couple of others. WisdomTree has a broad based EM fund in the works that I want to explore when it comes.
Just goes to show - Chuck Clough sucked as an economist and he sucks as a money manager. Coincidence?
Why not dig up a bunch of other lame ass second-tier Wall Street types who have ventured into the great world of hedge funds and have had their asses handed to them. That would be a fun holiday read.
Actually I like Chuck, I think his shareholder letter, displays a good amount of the thoughtfulness that is needed for sucess in investing.
Hmmmm....this may finally be a good time to step in
to GLO or GLQ at nearly a
10% discount to NAV and a
high 6% divy. I suspect
Clough cannot get away from really being a value guy which hurt his 2006 performance somewhat.
Why else would anyone pick
Brazil and Japan as his
leading lights of international exposure and
maintain an allocation to
energy stocks other than relatively low p/e as compared to other choices?
I am less sure about the
wisdom of his global banking theme. By my calc though, he is up by about 3.2% in NAV YTD 2007 including dividends. Not great...but Japan has thus
far been kind of a global laggard. His funds might be a fairly decent choice in an overheated market for multi-year performance.
A quarterly payout this high can't hurt, so long as he can keep the NAV
moving forward.
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