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Investius Interview: ‘CEF IPO Perspective”

by on August 24, 2015

9-16-2015 8-24-22 PMThe initial public offering (IPO) process for launching new closed-end funds may be evolving to attract more investors, says John Cole Scott of CEF Advisors.

John Cole Scott, CEF Advisors

We’ve had, I think, two maybe three IPOs so far in the sector.  We have another one that comes out this week, for the closed-end fund sector… And what I see, one or two closed-end fund IPOs a month is a natural, healthy process, because this is something where you want to have fund sponsors and syndicate desks get together and get the best ideas, just not every idea, out there.  And the market’s going to allow that to adapt over time.

So I can opine that someday in the future closed-end funds may not be sold on the IPO with a stated yield.  It might just be a great manager with a great idea, and you want to be there, because of that, remember, the fixed capitalization of a closed-end fund and that daily investor liquidity that you don’t get with other fixed-capital products.


Do you see any changes ahead possibly in the IPO structure, in the way fund companies launch new funds?


Yes, so we’ve seen a couple of things in the last couple of months, some of the new funds.  We saw last fall, the first equity closed-end fund with a term provision, which means it will liquidate at net asset value 15 years out unless shareholders vote not to have that happen.  So that helps protect long-term investors of pervasive discounts.

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