A Greenback for Fifty Cents: Confirmed Methods to Outperform the Market with Closed-Finish Funds. 2025. Michael Joseph. IW$ Press
Closed-end funds (CEFs) are “chronically mispriced by the market,” writes Michael Joseph, CFA, however for buyers hoping to capitalize on that inefficiency, “merely shopping for a closed-end fund buying and selling at a reduction isn’t sufficient.” Simply choosing the funds with the deepest reductions to internet asset worth (NAV) or the very best yields, provides Joseph, is a “recipe for catastrophe.”
He additional cautions that investing in a CEF in hopes that an activist investor will swoop in and shut the hole between NAV and market worth is “dangerous” and “speculative.” Moreover, says the Deputy Chief Funding Officer at Stansberry Asset Administration, buying a CEF when it’s initially supplied is “irrational.” He additionally factors out that when the Fed aggressively raised rates of interest in 2022, a number of leveraged municipal bond CEFs’ valuations have been slashed almost in half.
By thus dispelling expectations of simple cash, the creator of this 89-page ebook corrects any misapprehensions that is perhaps induced by his title, A Greenback for Fifty Cents. That phrase additionally seems in a subheading of a bit recounting how Warren Buffett and Charlie Munger’s buy of 20 p.c of the shares of Supply Capital after the 1969-1970 market downturn drove the CEF almost 50 p.c beneath the worth of its underlying property.
Buffett and Munger finally doubled their cash, however as Joseph remarks in an understatement about reductions to NAV, they “aren’t all the time as steep as 50%.” In a fairer illustration of the particular alternative set, he cites analysis displaying that the perfect CEF technique is to purchase at a 20 p.c low cost, with the target of promoting when the low cost narrows to fifteen p.c.
