Under his concept, they would buy active ETF shares based on end-of-day net-asset-value prices the same arrangement used to price shares of regular mutual funds.
When they are deeply below net-asset value, as high-yield bond funds are now, they can be very good buys.
With the current state of the market, net-asset value can be a confounding calculation.
Shares in closed-end funds are traded on exchanges and can be above or, more often, below the net-asset value.
This has two drawbacks: a fund's net-asset value is quoted and so investors can buy or sell only once a day.
There is such a thing as a free lunch, sometimes, and it's closed-end funds trading at big discounts to net-asset value.
More than 100 closed-end funds are trading at discounts to net-asset value of more than 20.0%, though most of them are leveraged, meaning they borrow money to amplify their returns, a risky strategy if disaster strikes the portfolio.
This means that the share price and the net-asset value are one and the same, but it also means that portfolio managers are slaves to financial fashion: when an asset class becomes popular, money comes pouring in and they must buy.
Following a prominent fund's "breaking of the buck"--that is, a decline in its net asset value below par--in September, investors began to withdraw funds in large amounts from money market mutual funds that invest in private instruments such as commercial paper and certificates of deposit.
These unitholders will receive the then-current net asset value of the units, based on the current market value of the underlying securities in the portfolio, less any remaining deferred sales charge, as of the evaluation time.
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Generali also argues that its compensation does not matter, because it was paid no more than the net asset value of its East-European operations ie, what was left after subtracting policyholder liabilities.
The fund has a good track record of out-performing its net asset value return in strong market years and fund management has been a consistent buyer of shares (currently holding around a third of all shares outstanding).
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You can buy shares at any time at the net asset value, as with open-end funds, but you can only redeem quarterly and not necessarily all your holdings.
The Equus Total Return ( EQS) trades at a -58.48 discount, but invests in non-listed securities so the net asset value is open to interpretation.
The only sure way to drive a closed-end fund closer to its net asset value is to attract a raider who tries to force management changes or a liquidation.
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All else being equal, stick with closed-end funds selling at discounts to net asset value.
If you choose a closed-end fund trading at a discount to its net asset value, you might also get some capital appreciation, says Maury Fertig, chief investment officer at Relative Value Partners LLC, Northbrook, Ill.
Unlike open-end mutual funds that are bought and sold at Net Asset Value (NAV), ETFs are traded throughout the day at whatever price clears the market.
So shares in close-ended funds may trade above or (more often) below net asset value.
Our second portfolio contains closed-end funds that are trading at the steepest discounts to their net asset value.
One is to invest in closed-end funds that trade at the highest absolute discount from their net asset value.
Another closed-end fund, it trades at a 13% discount to net asset value and has an expense ratio of 1.7%.
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