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July Closed-End-Fund Odd Lot Tender Offers

AlphaVulture

AlphaVulture

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While the JAKK and CACC tenders haven’t yet completed a bunch of new tender offers with odd lot provisions have already been announced for July. They are for closed-end funds, and instead of a fixed dollar value per share you will get a percentage of NAV. Since they are all trading at a discount this creates an opportunity with positive expected value, but you do have market risk while holding the position. Because of that I’m going to wait till the last moment before buying, since I don’t expect that the discount will significantly change between now and the close of the tender offer.

The following funds have announced a tender offer:

FundTickerNAVLast PriceOfferDeadlineEV ($)
MS Eastern EuropeRNE15.9214.4198.5%July 10126
MS Emerging MarketsMSF14.9013.5898.5%July 10109
MS India InvestmentIIF16.1814.6398.5%July 10129
Turkish InvestmentTKF15.0113.6698.5%July 10111
Latin American DiscoveryLDF15.0813.9598.5%July 1089
China FundCHN23.7721.5199.0%July 23200
Total expected value for the all the closed-end fund tenders is 764 dollars before transaction costs, or an ~8.4% return on a ~$9,000 dollar position that you have to hold for just a few days if you want to play it safe (although I actually think you don’t need to wait before the trade settles before you can tender, so you could buy on the last day).

Disclosure

Not long any of the funds, but will buy between now and the deadlines.


Rating: 2.7/5 (3 votes)

Comments

byslkwd
Byslkwd - 1 year ago
Is it possible for anything to go wrong on this trade? Like what?
BetterCEFThanSorry
BetterCEFThanSorry - 1 year ago
Yes Byslkwd, it can go wrong: as of 6/29/2012 close, the average discount on these six was about 8.5%, and the tender offer is for 1.5% off NAV, so you have the prospect of making a 7% of NAV spread before trading costs. As AlphaVulture suggests by mentioning market risk, if emerging markets stocks tank 7% during the time you hold these, your profit is gone. So unless you're peeling off some existing emerging markets exposure to play this game, and plan to return the proceeds to that exposure, you may want to put on a hedge to ensure this arb profit.
sf631
Sf631 - 1 year ago
Great summary. Is there a good source of closed-end fund tender offers or do you just keep an eye out for press releases and brokerage bulletins?

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