Liliana Dearth is to be excused if she sometimes feels like a kindred spirit with the late Rodney Dangerfield. Just as the legendary comedian complained about not getting any respect, the Spain Fund (ANF) that Dearth manages doesn't seem to be treated with the esteem its portfolio performance merits.
Dearth could claim, with complete truthfulness, that the Spain Fund's total reinvested return was a respectable 13.2% annual rate for the past three years ended Aug. 31. The fund's problem is that an investor could claim, with equal veracity, that the fund's return for the same three-year period was a lackluster 1.5%.
The disparity in returns is a result of the difference between rates of return achieved by the fund in growing its assets and the value the market attaches to the fund. Even though a closed-end fund might be successful in growing its net asset value per share at a benchmark-beating rate, an investor's return is based on the market price of its shares that's determined by the supply-demand interaction of stock market participants.
The disparity between the Spain Fund's return based on its NAV and the fund's lagging stock market return left it recently priced at 8.9% below the value of its portfolio holdings. SNF's top holdings include Telefonica SA (TEF) , Banco Santander (SAN) , Banco Bilbao Vizcaya (BBV) and Repsol SA (REP) .
Listed nearby are five funds whose three-year market performances lagged their respective annualized total-return NAV advances by at least 7 percentage points.
The quintet of closed-end funds in the table has also been suffering disparities between NAV returns and market results for the most recent 12 months. For example, Michael Tokarsz and his team at the MVC Capital Fund (MVC) achieved an impressive positive return on their fund's net asset value per share of 17.9% over the past 12 months while the give-and-take of the market drove the market return of the fund to a 7.2% loss.
Reasons for disparities between NAV results and market returns include concerns about liquidity of holdings and fears of future losses. And investors are cautioned about buying a closed-end fund because it is priced at a discount from net asset value per share, as it is not uncommon for a discount to persist for years.
With the Spain Fund, Thai Fund (TTF) , MVC Capital and the Macquarie Global Infrastructure Fund (MGU) , uncertainty about the future would be a likely explanation for the lagging market performances and discounts from net asset values.
But with Equus Total Return (EQS) , the lag of market price vis-à-vis NAV might be traced to concern over the liquidity of investments in its portfolio because it invests in equity and equity-oriented securities, such as debt convertible into common or preferred stock or debt combined with warrants, options or other rights to acquire common or preferred stock.
|I Tell Ya These Funds Get No Respect |
|Spain Fund||Thai Fund||MVC Capital||Equus Total Return||Macquarie Global Infrastructure|
|TheStreet.com RATINGS GRADE||D+||D-||B+||C+||D|
|INVESTMENT OBJECTIVE||Non-US Equity||Non-US Equity||Growth - Domestic||Equity Income||Global Equity|
|PORTFOLIO MANAGER||Liliana C. Dearth||James K.K. Cheng & Team||Michael Tokarz & Team||Team Managed||Justin Lannen & Team|
|TOTAL ASSETS ($MIL.)||106.3||204.1||401.7||103.2||506.2|
|12-MO. TOTAL NAV RET'N (%) *||-9.60||-8.16||17.86||16.95||-11.19|
|12-MO. TOTAL MKT. RET'N (%) **||-30.62||-20.24||-7.19||-1.45||-17.25|
|3-YR. ANN'L NAV RET'N (%) *||13.19||11.45||23.25||16.94||11.48|
|3-YR ANN'L MKT. RET'N (%) **||1.53||2.78||15.25||9.28||4.08|
|DIFF. BETWEEN 3-YR. NAV RET'N & 3-YR. MKT. RETURN (PERCENTAGE POINTS).||-11.66||-8.67||-8.00||-7.66||-7.40|
|PREMIUM/DISCOUNT OF MKT. PRICE VS. NAV (%)||-8.85||-10.64||-13.15||-38.08||-14.65|
|* Investment returns based on net asset value (NAV) per share of fund, with all distributions assumed to be reinvested. |
** Investment returns based on market price per share, with all distributions assumed to be reinvested.
Source: TheStreet.com Ratings - Data as of 8/31/2008.
For an explanation of our ratings, click here.