Closed-end performers

Andrew Leckey

May 29, 1991|By Andrew Leckey | Andrew Leckey,1987 Tribune Media Services, Inc.

Investors have plunked $85 billion into something different and they like it.

Many closed-end funds have been turning in excellent performances in 1991. The Herzfeld Closed-End Average of 19 closed-end equity funds is up 18 percent, roughly twice the gain of the Dow Jones industrial average this year.

Among these investments, single-country, health-care and financial institution funds have done best.

Closed-end funds differ from the $1 trillion in open-end mutual funds in their availability for sale as shares on the New York Stock Exchange and other exchanges. Unlike open-end funds, which create new shares to meet investor demand, closed-end funds start with a set number of shares.

Since funds are fixed in their amount of capital, managers can structure portfolios as they want without worrying about money coming into the fund or redemptions.

As with any stock, a closed-end fund's shares sell at a discount or premium to the overall market, depending on the investment community's perception. When you sell, you pay a brokerage fee without the redemption restrictions, back-end fees or other red tape that so many open-end mutual funds require.

"The trick is studying the discount at which a closed-end fund is selling to determine the best time to buy," explained Thomas Herzfeld of Thomas J. Herzfeld Advisors Inc., a Miami-based investment management and research firm specializing in closed-end funds.

Top-performing 1991 closed-end funds are a study in volatility:

Thai Capital Fund (NYSE), which increased 56 percent in value during the first quarter as Thailand showed renewed confidence after a bloodless coup, corrected and is now up 26 percent for the year.

Spain Fund (NYSE), up 47 percent in the quarter as that country was recognized as one of the better investment bets in Europe, is currently up 39 percent.

H&Q Healthcare Investors (NYSE), a thinly traded stock up 46 percent for the quarter as it benefited from biotechnology, health-care and medical-supply stocks, is now up 31 percent.

Brazil Fund, (NYSE) up 44 percent for the quarter on rising Wall Street confidence in that country's potential for a rebound, is now up 94 percent.

Japan OTC Equity Fund (NYSE), up 44 percent for the quarter as small Japanese companies rebounded after the Persian Gulf war, has remained steady.

Real Estate Securities Income (American Stock Exchange), up 43 percent for the quarter as the real estate investment trusts in which it invests came back after a disastrous 1990, increased momentum and is now up 52 percent.

Alan Carr, president of H&Q Healthcare Investors, likes the closed-end format in part because he's able to put a portion of assets into venture capital projects in the health-care industry.

"The health-care sector will continue to grow because we're all getting older, technology has become phenomenal and willingness to spend for immortality is strong," said Carr.

Emphasizing nursing home properties through publicly traded real estate investment trusts, Robert Steers, chairman of Real Estate Securities Income, sees the end of a four-year bear market in real estate. Nationwide Health Properties and Meditrust are examples of health-care investments. He's also big in shopping centers.

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