Phillip Goldstein and Bulldog Investors’ New Target

Phillip Goldstein and Andrew Dakos’ Bulldog Investors is literally a hungry hedge fund trying to create value by taking on corporate executives and closed-end fund managers. There aren’t a lot of hedge funds trying to go after closed-end funds. First, here is how this strategy works.

Closed-end funds occasionally trade at a significant discount to their Net Asset Value (NAV). It isn’t surprising to see discounts of 10-15%. Fund managers don’t have a lot of interest to close this discount. As a result some closed-end funds trade at a discount for an extended time period. Activist hedge funds buy 5-10% positions in these closed-end funds and try to force the funds’ operators to take action. They take larger stakes if they can hedge their NAV risk effectively.

The most important weapon in their arsenal is proxy contests. They can change the funds’ board and take control of the fund. Another action that they can take is to file shareholder proposals for contingent tender-offer plans. If these plans are accepted, the company could do a partial tender offer when the discount reaches a predetermined threshold. The main problem is that funds’ operators want to keep the fee income, so they usually don’t want to take any action that will reduce their assets (and fees). That’s why activist investors’ success ultimately depends on their ability to win a proxy contest.

First Trust Files For Unique Commodity ETF

Last Friday Phillip Goldstein disclosed a 10% stake in First Trust Strategic High Income Fund III (FHO). $FHO currently trades at an 11% discount to its NAV. We expect interest rates to edge up over the next year. So, investors might be better off if they hedge their risks in this case, which might not be easy.

We aren’t aware of any other funds monkeying Bulldog Investors so far. They probably welcome it though. When other activist investors build large positions to win a proxy contest, all activist investors benefit. It happened before, it may happen again.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

50 Crazy Facts About Japan You Won’t Believe

Top 10 Least Expensive Hybrid Cars to Save the Planet With

The 10 Biggest ‘Gate’ Controversies in History

The 10 States with the Highest Nursing Shortages Leaving Their Hospitals Depleted

The 10 Best Value Investment Blogs that Every Investor Must Read

The 6 Cheapest Boarding Schools in Europe 2015

The 5 Most Expensive Cars To Insure in the World

The 10 Most Common Genetically Modified Foods

10 Self-Made Billionaires Who Came From Nothing

The 10 Most Expensive Cities to Live in North America

The 13 Most Expensive Headphones in the World to Represent

The Top 20 Wealthiest Soccer Teams in 2014

4 BuzzWorthy Cannabis Stocks And Some Smoking Derivative Plays

The 10 Healthiest Fast Food Chains in America to Dine At

The 5 Most Expensive Cat Food Brands You Can Spoil Your Kitty With

The 6 Best eCommerce Platforms for Small Businesses

The 10 Worst Mistakes an Entrepreneur Can Make

The 5 Most OP Characters in League of Legends to Carry Games and Crush Foes With

The 5 Best Foods to Eat Before Running that Will Help You Pound the Pavement

10 Glaring Plot Holes in The Walking Dead that a Zombie-Filled Bus Could Drive Through

The 5 Biggest Celebrity Stoners Who Love Their Reefer

The 10 Most Overrated Movies Of All Time by Out-of-Touch Critics

Top 6 Least Expensive Cruise Destinations For 2015 that Will Take You to Paradise

10 States with Lowest Substance Abuse Rates in America

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

How to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!