CEF Broadens Scope in Search of Income

CEF TIMES July 13-19: Securities Trust of Scotland changes its investment process to seek income globally rather than being a UK-only vehicle

Szymon Idzikowski 20 July, 2011 | 3:55PM
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BlackRock Absolute Return EUR (BARE): Shareholders of the hedge fund will vote on changing the fund’s investment policy and objective in order to allow for a managed wind-down of the portfolio. The decision will be taken during the next extraordinary general meeting on August 18. Meanwhile, the fund will be managed in a way that should allow a significant amount of proceeds to be returned to investors through a compulsory redemption of shares, according to BlackRock.

Conversus Capital (CCAP): Private equity company Conversus Capital has commenced another tender offer, up to a maximum of $50 million for 2.13 million common units. The offer closes on August 15. This is the third attempt this year to increase liquidity and improve the fund’s trading price relative to its NAV. Currently the fund trades at a discount of around 23% to NAV.

Edinburgh US Tracker (EUS): Brewin Dolphin has reduced its stake by over 3% to just below 5%, in a move that has changed its position from the greatest shareholder to the fifth largest. This is the first big shift this year among the main shareholders of the fund.

FRM Credit Alpha GBP (FCAP): The hedge fund will return approximately £8 million to its shareholders by way of a compulsory partial redemption. All redeemed shares will be cancelled and existing ISIN number GG00B3ZPG020 will expire. Remaining shares will receive a new ISIN GG00B4K46K11, which will be available for transactions from July 25 onward. The fund was launched in March 2007 and has lost over 40% of its assets since its peak in June 2008.

Henderson International Income (HINT): While decreasing its stake in Edinburgh US Tracker, Brewin Dolphin has increased its stake in Henderson International Income by another 1% to take its total holding to over 13%, strengthening its position as the largest shareholder of the company.

RENN Universal Growth (RUG): Two major shareholders have adjusted their stakes in this North American small cap fund. Ruffer has substantially increased its stake from less than 2% to over 10%, making it the third largest shareholder, while Lloyds Banking Group (LLOY) has decreased its stake by 6% to less than 2%. RENN Universal Growth is currently trading near a 24% discount to its NAV.

RAB Special Situations (RSS): Following giant losses in 2008 and an exodus of clients in April this year, hedge fund manager RAB Capital has announced plans to delist RAB Special Situations from the stock market in an attempt to reduce costs and pursue a more flexible strategy. The fund manager has been forced to take this action as RAB Special Sits has never recovered from the financial crisis, when its significant holdings in Northern Rock and other losses prompted NAV to drop over 70% in 2008, compared to the 18% decrease seen at its FTSE World TR benchmark.

Securities Trust of Scotland (STS): Following a change of the investment process, Alan Porter will replace Ross Watson as the manager of the fund. Shareholders of Securities Trust of Scotland voted in favour of moving the fund away from being a UK-only vehicle to a fully global income investment trust. Porter joined the fund management firm, Martin Currie, in 2008 and has been running a similar strategy at Martin Currie Global Equity Income since November 2010.

SVM UK Active (SVU): Last week the company announced the termination of the investment management agreement and a change to the entire board of directors of this fund. This has been followed by another announcement this week, releasing plans to wind up the company and cancel its listing on the London Stock Exchange.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Szymon Idzikowski

Szymon Idzikowski  is a closed-end fund analyst with Morningstar.

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