it's still a regular IPO process with 5% underwriting fee and over-allotment shares (support). It takes around 45 days to get rid of the premium most of the time. under certain market conditions and in several "star" offerings, premium might only increase over and above 5%, but it is indeed a rare occasion.
underwriting fees are paid by investors who get access via financial advisors associated with the underwriting, most notably UBS, MS, BAC.
for a semi-educated investor, the time to buy after the IPO premium has disappeared. it could be due to the price going down or due to exceptional performance of the NAV catching up with the price.

My understanding of the ipo issue with CEFs: There are costs to bring a new closed end fund to the market. Those costs are borne by those who purchase the initial public offering. When I looked into it years ago, those costs averaged approx. 5%. So at the time, most closed end funds, at the ipo prior to the first trading day, were priced roughly 5% above the NAV, due to those costs.

It sounds like the best you can do now is buy into a fund that that a good percentage of healthcare in it. Matthews has some. Thinking on the subject a bit more, healthcare here would be mostly a volume issue as more and more people can afford it. As an example, a relative of ours works in a kidney dialysis unit in a larger hospital. They are quite busy with two shifts a day. Ten years ago this was not the case. Most kidney patients had to go to Manila. This is in another major city on Mindanao. They have started heart and brain surgeries also which also were only available before in a couple of hospitals nationwide. While this is a good area to watch the biggest bang will still be in biotech, bionics, and anything that is future related. The US, Australia and Europe will lead in those areas.
Thanks for the follow up @LLJB.

managed distribution is almost unique to equity CEFs. ... i generally don't understand why you need to access equities via CEFs anyway... so managed distributions is not a concern for majority of the CEF investors.

Still true, but not as obvious as one might think. From ICI's 2014 Investment Company Fact Book:

Historically, bond funds have accounted for a large share of assets in closed-end funds. A decade ago, 75 percent of all closed-end fund assets were held in bond funds, and the remaining 25 percent were held in equity funds (Figure 4.2). At year-end 2013, assets in bond closed-end funds were $165 billion, or 59 percent of closed-end fund assets. Equity closed-end fund assets totaled $114 billion, or 41 percent of closed-end fund assets. These relative shares have shifted, in part because cumulative net issuance of equity closed-end fund shares has exceeded that of bond fund shares over the past seven years. In addition, total returns on U.S. stocks* averaged 8.1 percent annually from year-end 2003 to year-end 2013, while total returns on bonds† averaged 4.7 percent annually.

CEFconnect reports only 6 out of 146 closed end taxable bond funds (and no tax-free bond funds) have managed distributions, confirming that most managed distribution funds are equity funds.

My understanding of the ipo issue with CEFs: There are costs to bring a new closed end fund to the market. Those costs are borne by those who purchase the initial public offering. When I looked into it years ago, those costs averaged approx. 5%. So at the time, most closed end funds, at the ipo prior to the first trading day, were priced roughly 5% above the NAV, due to those costs.

Well, at least GTAA did not fall during 4 years (it hugely underperformed other global funds). But his new global fund GVAL plunged down 13.5% during the first 8 months of its life. I do not know what is wrong with Meb as a money manager. Having his money in his funds is commendable, but should we follow his example? He is getting paid even when his funds are going down.

GVAL has a ton in Brazil and Europe (Spain, Italy, etc.)
Brazil has been a mess and doesn't look to be really improving. Europe is problematic, as well.
From the fund website:
"Removing Emotional Decision Making - One of the difficulties of investing in foreign countries is the inability to stay the course when geopolitical headlines
are negative. The Cambria Global Value ETF rebalances into countries that are trading at low valuations, which often coincide with negative headlines and
bear markets in such countries’ stock indexes. GVAL gives the investor the potential benefit of owning securities in over-sold markets."
So you have a fund that searches out stocks trading at levels believed to be below intrinsic value, but is it taking into account anything else, like potential catalysts? Appears to be no.
So, you have a fund that's going to lag, possibly for a long time, while it tries to move towards undervalued areas but is unconcerned if there's any sort of catalyst/reason.
Not quite sure on this methodology of searching out value based purely on unseen metrics, or at the very least it's something that should be a small % of a portfolio and understood that it's a long-term time horizon. Not something I'm really interested in, but that's just me.

Well, at least GTAA did not fall during 4 years (it hugely underperformed other global funds). But his new global fund GVAL plunged down 13.5% during the first 8 months of its life. I do not know what is wrong with Meb as a money manager. Having his money in his funds is commendable, but should we follow his example? He is getting paid even when his funds are going down.

I also have PHSZX. It has Potential Cap Gains Exposure 46.80%, and this year it will distribute some part of it. Historically it was a small fund, but success attracted investors, it closed and yet more than doubled in size since that time, so it is hard to say how good it will be in the future. Probably good since it has the same experienced manager for 15 years, but I do not want to add to it at this stage.

Dear Charles,
Can you explain why there is such an interest in Meb Faber and his funds? Perhaps he is a good theorist and a good writer, but his first ETF GTAA has grown by 5% since its inception 4 years ago, while world stock funds were up almost 50% and ARTGX has grown up 68% during the same time.
Then he started a new ETF, GVAL, in March 2014, and since that time GVAL plunged down 13.5% whereas ARTGX was 2% up.
So now he is starting yet another ETF, and MFO discusses how Meb Faber gets it right in interesting ways. Am I missing something?

Bee, THOPX is ~ 90% investment grade (mostly BBB) and OSTIX is more than 90% non-investment grade; I don't think you can call those similar holdings. Making a choice between them involves a portfolio allocation decision.

Your correct with respect to credit risk. I guess my point has to do with overall risk/reward. I'm impressed with both funds overall performance. These are managed bond funds so I am sure both fund's bond holdings have changed over these 11 years.
Finding bond fund managers who can navigate both credit risk and interest rate risk along with market risks will serve an investor well. OSTIX gets my nod for managing both risk and reward along with its impressive performance in 2008-2009 (market risk).

Hi JohnChisum,
Thanks for making a comment.
I agree, no doubt some folks get turned off by a sales load. But, once paid they are usually free to move around within that family of funds to other funds, through nav exchanges, without paying another sales load.
One of the best ways I have found to manage the sales load, for a small retail investor, is to buy a fund family’s bond fund which usually has a smaller sales load than their equity funds and then do a nav exchange later into the equity position. You might check on this in more detail if you are interested as usually there are certain required holding periods and a limit as to how often you can do nav exchanges among funds.
I like holding all of my investments with one broker and in this way come tax time I get one consolidated 1099 statement for all my investment positions within my taxable account. If I held them split among a few fund houses or split among a couple of brokers then my accountant would have to generate a consolidated 1099 spread sheet as a part to filing my tax return. I figure, what I pay in mutual fund sales commissions that get spread over many years is a savings over having to pay my accountant annually to compile a consolidated 1099 spread sheet plus there are other things to consider.
Old_Skeet
Additional comment. I have owned both NARAX and PGUAX, each from time-to-time. I currently own PGUAX and if I chose I could move to NARAX commission free through the nav exchange program and then once parked in NARAX, I believe for 90 days, I could move back to PGUAX. The nav exchange program is one way I have found to move from fixed income to equity to play seasonal strategies without paying a sales load. And, the bookeeping is maintained by the broker's back office through sending out the account's 1099 Form which details all the account's transactions, etc. The one 1099 Form has certaintly reduced the hassels I generally have to deal with come tax time vs. many.
For those interested I have linked the M* report for PGUAX below. Notice its nice dividend of better than 4.25%.
http://quotes.morningstar.com/fund/pguax/f?t=PGUAX
Something to perhaps think on.

Hmmm...we would need to know the portfolio of GDX and GDXJ over the years. If you look at TGLDX portfolio 70% is International, but mostly developed markets. I do recall international exposure used to be 85%. If all of the 15% difference was EM, that could explain it.

Bill Bernstein M* interview talks breifly about adding precious metals equities to your help lower overall portfolio volatility and help long term returns. Most PM equity funds are now offering a free gift of Band aids and iodine with each set of falling knives that you purchase.
From their M* interview:
"Benz: On the flip side or in a similar vein, one deeply unloved asset class right now is precious metals, which was very much in vogue a few years ago. You think it's also a pretty interesting time to be looking at that asset class, too.
Bernstein: I do. It's a market that I've always been interested in. I've been following precious-metals equities for the past 25 or 30 years, and it's important to understand how this asset class behaves in the long term. It has very low long-term returns. If you look at Ken French's series, which goes back more than a half century, the return if you count the most recent declines probably comes out to be less than 5% per year nominal, which is 1% more than inflation over that period, which was 4%. So, it has gotten very low returns. It has bone-crushing volatility. Now, three times in the past 50 years, it's fallen in price by approximately 70%.
"Benz: So, why do we even want to own this asset class?
Bernstein:Well, it occasionally zigs. When the overall market sags, it does particularly well. When there is high inflation--and one of the reasons why it has done so poorly recently is that inflation hasn't turned up--it turns out that even with its high volatility and its crummy returns, adding several percent of it to your portfolio does improve its behavior. It improves its return and it improves its volatility as well; it lowers its volatility."
I must admit from a price stand point, these funds are grabbing my attention.
morningstar.com/cover/videocenter.aspx?id=670230

@John Chisum: What a difference 72 years makes !
Regards,
Ted
1942:

2014:

Once again thank you David, Charles, and everyone who works hard every month to bring us an informative commentary.
This month's writeup included SJPNX, The Japan Fund which has had different homes in the past and now will be merged into MJFOX. Many years ago I bought shares in the Japan Fund. It was either independent or was associated with Scudder. All I can remember was that the mailings came out of New York City. I benefited greatly from the dead cat bounces of the Japan market at that time. (Early 90's).
A good read as always.

"Hard to find a manager that good, and consistent." I feel fortunate. I've been invested since the 90's and the day he left FBR, I sold and I followed. I've learned from listening to him over the years the role psychology plays in investing. If you read his shareholder letters, it seems so simple. And yet, if it was so simple everyone would be doing it. Mr Akre has a way of making it all seem so simple and yet he's still relatively unknown. His fund along with YAFFX, ARTKX, FPACX and FMI funds are my don't leave home without them investments. Timeless in nature and easy to hold on to, even when times are bad.

Marty Whitman was managing well into his 80's. With this in mind, I could have yet another decade to enjoy Mr Akre's expertise. I hope his new charges are learning well, but just like his old trio, the students are seldom as good as the teacher.

I hope to join you in continuing to enjoy Mr Akre's expertise for the next 10 years. I don't know anything about "his old trio", how have they done?
Hopefully he teaches his "new charges" well and we can just stay in AKREX very long term.....

Mikey:Did you get that from "Wikipedia" or what is your source? Yes I make up my own definition of "retirement" and yours is quite different from my "stop working years", I guarantee you, and that is a "fact"

I've slowly come to the conclusion that Ted and a few others are right. These funds add nothing to a diversified portfolio. They in general, do not out-perform a decent balanced fund. If you have to be right twice, in an up market and in a down market, your odds are very slim the manager can pull it off. If you look, most of these funds are only decent in one market or the another. I was sold on RGHVX when it looked great over the last couple years. But it had no protection in a down market based on the latest slow down.
A bond substitute? Pick a conservative balanced fund with 15-30% stocks. A little spice to a portfolio? Say you put 10% into one of these funds for spice or protection. In a down-turn they may save you a 10% drop over equities. So your portfolio is down 1% less. Big deal. You will get that back when the market moves up again.
Nope, I'm convinced now these "interesting and intriguing" funds were a marketing ploy feeding off investors fears of the last great recession.

Healthcare has been "surging" for years, but I'm also in on two of others so that's good.

True. But, most HY, active managed funds remain flat/neutral at this time for pricing.
If the pricing remains the same going forward for a sustained period, an investor may still find a yield range of 5-6%. The capital appreciation may not be in place as during the past several years.
Today (with the crazy upward moves in global equity markets) may provide some more clues for the HY sector. Although one should consider that if the flows to equities remains strong, some of these monies may not travel the HY road right now.
Take care,
Catch