Another Knock Out
We do not wish “ill will” on the closed end fund market, but Saba Capital continues to be effective as a catalyst for unwrapping this almost 250 year old investment wrapper. The first closed end fund was launched in 1774, according to Vanguard.
In July, investor in the Saba Capital, including the Saba Closed End Fund ETF (CEFS) capitalized on the liquidation of the MFS California Closed End Fund. This is SABA’s 18th discount it helped narrow in the closed end fund space. Details about the MFS’s California Closed End fund (CCA) liquidation can be found at https://finance.yahoo.com/news/mfs-investment-management-announces-planned-201500795.html.
With AUM of about $35M, the fund was small to begin with so it seems that MFS simply thought it best to do the right thing after Saba took a large stake in the fund in December when the discount was as wide as 18%. Opportunistic positions are a component of Saba’s activist strategy and part of the reason for the outperformance over the Invesco Closed End Fund ETF (PCEF) and the Amplify Closed End Fund (YYYY).
Saba as a firm with AUM of $1.6 Billion holds about $1.3 Billion in closed end funds. While the ETF is small at about $40 million, we think investors should be looking closely. The yield is compelling at about 8% and the opportunity to continue to further capitalize on closed end fund market discounts in the range of 10-15% offer the opportunity to earn equity like returns from an antiquated investment wrapper.
