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Anyone familiar with The Gabelli Global Gold, Natural Resources and Income Trust (GGN)

edited August 2011 in Fund Discussions
From Seeking Alpha:

"GGN is a closed-ended equity fund launched by GAMCO Investors, Inc. and managed by Gabelli Funds, LLC. Before we go any further it should be known that the fund is not an investment in physical gold. It is an income investment that happens to be using gold, silver, and natural resource stocks to derive income off the selling of covered calls. If we look a bit further into the fund we find it also invests in companies principally engaged in the exploration, production or distribution of natural resources, such as gas, oil, paper, food and agriculture, forestry products, metals and minerals as well as related transportation companies and equipment manufacturers. The gold component is made up of investments in equity securities of firms operating in gold and natural resources industries including companies in exploration, mining, fabrication, processing, distribution or trading of gold, financing, managing, controlling or operating of companies engaged in gold-related activities."

Share price is $16.88 and it pays a monthly dividend of 14 cents...about 10% annually.

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  • I believe there's also a preferred share, GGN-A.
  • edited August 2011
    In terms of "real assets", I added more earlier today to the Salient MLP Energy and Infra fund (SMF), a closed-end MLP fund that can actually hedge.

    From the prospectus:

    We currently expect to utilize hedging techniques such as interest rate swaps to mitigate potential
    interest rate risk on a portion of our Financial Leverage. Such interest rate swaps would principally be
    used to protect us against higher costs on our Financial Leverage resulting from increases in both shortterm and long-term interest rates. We anticipate that the majority of our interest rate hedges will be
    interest rate swap contracts with financial institutions.

    We also may use various hedging and other risk management strategies to seek to manage various risks
    including market, credit and tail risks. Such hedging strategies would be utilized to seek to protect the
    value of our portfolio, for example, against possible adverse changes in the market value of securities
    held in our portfolio. We may execute our hedging and risk management strategy by engaging in a variety
    of transactions, including buying or selling options or futures contracts on indexes and entering into total
    return swap contracts. See “Risk Factors—Risks Related to Our Investments and Investment
    Techniques—Derivatives Risk.”

    We may use arbitrage and other strategies to try to generate additional return and protect the downside
    risk of the portfolio. As part of such strategies, we may purchase call options or put options and enter into
    total return swap contracts. A total return swap is a contract between two parties designed to replicate the
    economics of directly owning or shorting a security. We may enter into total return swaps with financial
    institutions related to equity investments in certain Master Limited Partnerships and Canadian Income
    Trusts (as defined in the SAI).
    In addition, we may engage in paired long-short trades to arbitrage pricing disparities in securities held
    in our portfolio or sell securities short. Paired trading consists of taking a long position in one security
    and concurrently taking a short position in another security within the same or an affiliated issuer.

    With a
    long position, we purchase a stock outright; whereas with a short position, we would sell a security that
    we do not own and must borrow to meet our settlement obligations. We will realize a profit or incur a loss
    from a short position depending on whether the value of the underlying stock decreases or increases,
    respectively, between the time the stock is sold and when we replace the borrowed security. See “Risk
    Factors—Risks Related to Our Investments and Investment Techniques—Short Sales Risk.” We do not
    presently intend to short securities in the portfolio, and do not intend in the future, to the extent short sale
    transactions occur, to have a net short position that exceeds 30% of our total assets.

    To a lesser extent, we currently expect to write call options for the purpose of generating realized gains
    or reducing our ownership of certain securities. We typically will only write call options on securities that
    we hold in our portfolio (i.e., covered calls). A call option on a security is a contract that gives the holder
    of such call option the right to buy the security underlying the call option from the writer of such call
    option at a specified price at any time during the term of the option. At the time the call option is sold, the
    writer of a call option receives a premium (or call premium) from the buyer of such call option. If we
    write a call option on a security, we have the obligation upon exercise of such call option to deliver the
    underlying security upon payment of the exercise price. When we write a call option, an amount equal to
    the premium received by us will be recorded as a liability and will be subsequently adjusted to the current
    fair value of the option written. Premiums received from writing options that expire unexercised are
    treated by us as realized gains from investments on the expiration date. If we repurchase a written call
    option prior to its exercise, the difference between the premium received and the amount paid to
    repurchase the option is treated as a realized gain or realized loss. If a call option is exercised, the
    premium is added to the proceeds from the sale of the underlying security in determining whether we
    have realized a gain or loss. We, as the writer of the option, bear the market risk of an unfavorable change
    in the price of the security underlying the written option.
  • Reply to @scott:

    Thanks Scott, It looks like these hedging strategies are more common than one would like. I am trying to understand the "options" market a little better so thanks for this included explanation of how this fund hedges.

  • Reply to @Ted:

    Thanks Ted, I bookmarked both of these sites.

    Looks like CEF = Central Fund of Canada which a CEF (Close End Fund) get high marks.

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