Behind the Headlines July, 2006

Article Excerpt

We’ve recommended a select number of closed-end mutual funds over the years in Canadian Wealth Advisor as a great way to buy high-quality assets at a discount. As we’ve said, many closed-end funds eventually liquidate, or transform themselves into open-end funds. When that happens, much of the discount disappears overnight. The fund’s shares may then jump up to 30% or more. A good example is the closed-end Brazil Fund. The fund liquidated its portfolio of securities and distributed the proceeds to its shareholders in June. The fund gained 454.5% for us since we first recommend it at $11 in 1999. The lead up to the liquidation closed the fund’s 9% discount. The discount alone is a poor reason to buy a closed-end fund. The fund can trade at a discount for many years. The discount may even widen for a time. These funds also have limited broker support and are not usually active traders. So closed-end funds are buys only for patient, safety-conscious…

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