Closed end fund (CEF) arbitrage and premium/discount theory

I found this excellent paper through the Simoleon Sense blog, which I think very highly of and read attentively. Their post: http://www.simoleonsense.com/attention-graham-dodders-new-paper-closed-end-funds-activist-investors-whats-the-attraction/

The link to the paper they discuss: http://yesandnotyes.com/blog/wp-content/uploads/2009/12/deo-Closed-End-Funds-and-Activist-Investors.pdf

The Simoleon Sense post:

Attention Graham & Dodders: New Paper Closed End Funds & Activist Investors: Whats The Attraction?

January 2, 2010

One of my very good friends Doug has put together a  paper on activist investing and closed end funds. Doug is the mastermind behind the yes & not yes blog.

Click Here To Read: Closed End Funds & Activist Investors: Whats The Attraction?

Abstract (Via Douglas E. Ott, II @ Yes & Not Yes)

This paper offers a basic description of why activist investors are attracted to closed-end funds and how this affects the rights of the closed-end fund shareholders. Part II provides a general description of the closed-end fund structure and a review of the research that attempts to answer why most closed-end funds trade at discounts to their net asset value (NAV). Part III outlines the reasons closed-end funds are attractive opportunities for activist investors. Part III also provides a detailed account of three proxy contests that occurred between activist investors and incumbent directors of closed-end funds: (1) the activists failed in their contest and there were no positive effects for shareholders as a result of their efforts; (2) the activists failed in their contest and there were positive effects for shareholders as a result of their efforts; and (3) the activists were successful in their contest and were able to enact measures that benefited shareholders. These real-life examples illustrate the motivations of the activists (e.g., return on and of their investments, concern for shareholders’ rights) and also the problems that seem inimical to closed-end funds (e.g., unitary boards, conflicts of interest, fund shares that trade at large discounts to NAV). Part IV argues that, contrary to the feelings of the managers and directors of closed end funds, activist investors can be a desirable element for all investors in the targeted closed-end funds as they may be able elect directors that are more independent and are often able to decrease the discount to NAV just with an announcement of a proxy contest.

Strategies For Uncertain Times: Municipal bond update

The two major muni bond closed end fund (CEF) companies are Blackrock and Nuveen. I’ve written previously about my preference for insured-only investments because it reduces default risk and raises the certainty of your returns. My previous post about munis is here: https://knowledgecapitalist.wordpress.com/2009/12/15/strategies-for-uncertain-times-municipal-bonds-munis/

Here’s the link to the Blackrock funds list (munis listed and sortable by state so you can find the one that applies to your location).

http://www1.blackrock.com/Default.aspx?cmty=ind&m=ind_2&m1=ind_2_1&lo=9&appname=wsod_perf&appurl=http://www.blackrock.wallst.com/public/performanceCenter.asp?fundSwitch=CE

Here’s the link to the Nuveen funds list (munis listed and sortable by state so you can find the one that applies to your location).

http://www.nuveen.com/CEF/DailyPricing.aspx

Taxable vs. tax-free accounts: where do you hold your investments?

First, let’s just assume that you have two investment accounts: a personal investment account and a tax-advantaged (tax free) IRA

Hold in a taxable account:

Commodity funds: If they invest in the actual commodities they won’t pay significant distributions/dividends like natural resource / commodity funds that buy equities of companies whose operations are based on the actual commodities. Since there are low distributions, and presumably you’re holding commodities as a core investment holding for asset allocation purposes and as a hedge against inflation, you probably plan on keeping your commodity holdings for longer than one year. If so, that means your sales will be classified as long-term capital gains, so the tax hit is only about 15%

Biotechnology funds: Biotech companies have little or no dividends, in general, so there’s little to no current income. Assuming again that this is a long-term holding, you probably hold it for over a year, which again means the long-term capital gains tax hit is only about 15%.

Covered call funds: Since covered call funds have long-equity exposure, I prefer to hold them in my taxable account because, should they decline, I can take tax losses against other long-equity positions b/c that’s where I hold single stock and other equity positions (like emerging market equity ETFs). I try to hold all my long-equity positions over one year to get long-term capital gains tax treatment, but if you’re a short-term trader then you should probably do so in your tax-free account to avoid the higher short-term tax impact. Keep in mind that you can’t take tax losses on your investments in a tax free account, so if you do lose money you can’t sell your losers to offset taxes on your winners.

Long/short equity funds: I hold them in either my taxable or tax free accounts, but at the moment I prefer to hold them in my taxable account because they don’t really distribute investment gains or dividends with frequency or meaningful size. If you have a long/short equity fund in your tax free account, and the tax free account allows you to sell after time without realizing any capital gains taxes at all, then it makes sense to keep it there if you’re willing to hold on for a long time horizon.

Private equity ETFs: They distribute some dividends, depending on the holdings of the ETF (some PE firms that are listed pay dividends and some don’t). I personally look at the PE sector as a unique investment at the moment because of their unusual volatility over the last two years or so, so I don’t think I’ll sit on my private equity ETF holdings indefinitely, so I keep it in my taxable account.

Buyback / repurchase ETFs: Companies that have large repurchases have opted to allocate their capital towards returning it to investors and doing so via buyback and not dividend, hence the dividend income is pretty small. As a result, it’s basically a capital appreciation investment, and since I hold that type of investment longer than a year to qualify for long-term capital gains tax rates, I keep it in my taxable account.

MUNICIPAL BONDS / MUNI BOND FUNDS: THESE SHOULD ALWAYS BE HELD IN YOUR TAXABLE ACCOUNT BECAUSE YOU DON’T PAY TAXES ON THEM ALREADY. That’s the point of holding munis, so there’s little logic in holding a tax free investment in a tax free account, because it’s redundant.

Hold in a tax-free account:

Real estate funds: Most real estate funds generate significant current income via dividends, and REIT dividends actually do NOT qualify for the lower qualified dividend tax rate. Additionally, most real estate funds have high turnover (though not all do) so you avoid their short-term capital gains exposure by holding it in a tax-free account.

Emerging market debt: They pay out non-qualified interest income frequently and a good portion of their capital gains tend to be short-term, so I hold them in my tax free account.

Merger arbitrage funds: They have VERY high turnover because most deals get closed in less than a year, so they have significant short term capital gains issues, hence I hold it in a tax free account.

Closed end fund (CEF) fund of funds (FoF) CEF FoF: They pay out a ton of distributions that usually do not qualify for lower dividend tax rates.

Currency funds: Their distributions need to be shielded from taxes, but not all pay significant or frequent distributions, so you need to look at the history of the actual funds themselves before you decide.

Floating-rate /variable rate debt funds: The vast majority of them invest in senior bank loans that are not tax exempt, so you try to shield the taxable income by keeping them in a tax free account.

Strategies For Uncertain Times: biotechnology strategy update

Yesterday Bespoke Investment Group put out a blog post about the strength of health care stocks as of late. The title of their post is “Health Care ETFs Catch Fire” and the link is here: http://www.bespokeinvest.com/bespoke/2009/12/health-care-etfs-catch-fire.html

They attribute the sector’s strength to the Senate’s actions re: the proposed health care bill. I don’t disagree. They note, for example, the strength in XLV (Health Care Select Sector SPDR).

Examining HQH (H&Q Healthcare Investors), their portfolios share a few of their top 15 holdings (3 to be exact), although that’s not a terribly high number and the allocations to each security are not even close.

Between 9/15 and 12/5 (a 3 month period) XLV has returned 10.7% including at 13c dividend paid. During the same period HQH has returned 3% and it’s discount vs. NAV shrunk very slightly to 20.57% from 21.79% (it has not made any distributions). During the same period the PBE PowerShares biotech index has declined 2%.

So… this raises an interesting question: Should we either assume that 1) biotech lags overall health care sector price movements and will catch-up, or 2) does biotech trade independently with a low correlation versus even its parents sector overall, or 3) does biotech have unique challenges that have presented new reasons for investors to be cautious over the last 3 months?

I hypothesize that the correlation is actually pretty low (I keep screwing around with various beta calculations and get something between 0.5-0.6 between HQH and XLV, but these are not concrete numbers). Furthermore, if I examine the holdings of the XLV portfolio and other health care portfolios that have been rocking and rolling as of late, it’s clear that the parent industry portfolios have larger concentrations in the big cap pharma, services, and insurance names (closer direct impact to proposed health care legislation). That said, there is some overlap but the biotech names are smaller and less widely owned. Perhaps they are the less-desirable short-term trading vehicle?

The bottom line is that I don’t have the answer, but I do know that the CEF discount for HQH is still well above its historical average, and as their distribution was already cut a while back, I don’t see much downside in holding shares of the fund. However, the combination of not much downside and an uncorrelated investment makes HQH attractive in my eyes as a piece of an larger portfolio with a overall perspective of Strategies For Uncertain Times.

Strategies For Uncertain Times: Municipal Bonds (Munis)

Overview: I list this separately from “debt” because I view munis as a tax-avoidance strategy, and also because unique characteristics about the munis I look at like pre-refunded status and insurance mean they have different risks than other types of fixed income. Additionally, because I only look at New York muni bond closed end funds (CEFs) trading at a discount that are both insured and New York City tax-exempt, the long-CEF strategy is effectively a strategy by itself. The best way to pick muni CEFs based on  your location is to find them on CEFConnect and then go to the actual fund manager websites for additional detail and the most recent data.

Municipal Bonds

Overview: Generate tax free current income (federal and state if you buy a fund for your state, and potentially no city taxes either). Risk from material state-level fiscal problems across the nation. Some muni funds invest in insured securities, some don’t. Hold in a taxable account b/c income is already tax-free. Almost always makes sense to buy muni bond CEFs at a discount.

• Open-end mutual funds: THERE ARE LOTS OF THEM, BUY CEFs INSTEAD
• CEFs: THERE ARE LOTS OF THEM, ONLY BUY AT DISCOUNT
  • MYN: BlackRock Muni NY Insured
  • NNF: Nuveen NYC Insured
  • MHN: BlackRock Muni NYC Insured
• ETFs:
  • PZT: PowerShares Insured New York Municipal Bond
  • INY: SPDR Barclays Capital New York Municipal Bond

Strategies For Uncertain Times: Biotechnology

Overview: Biotech funds typically hold mostly equities of listed biotech companies, although some have private company stakes as well. Biotech stock returns have a relatively low correlation with overall equity markets (if you cure cancer, who cares what the S&P or the US economy might do next year).

Biotech/Healthcare

Overview: Low correlation with S&P, should get boost post government healthcare policy announcement. Valuations are below historical averages. Large cash balances at mega-cap pharma co’s should lead to M&A activity. Low current income/dividends means probably best to hold in a taxable account if you plan on holding for longer than one year period. Uncertainty regarding potential government policy/regulation has created an opportunity via unusually large CEF discounts.

• Open-end mutual funds:
  • PHLAX: Jennison Health Sciences
    • Jennison is outstanding in the healthcare space
  • FSMEX: Fidelity Medical Equipment & Systems
• CEFs:
  • HQH: H&Q Healthcare Investors
    • Has 0.77 beta w/ S&P
    • More service/distrib names than HQL, later-stage than HQL, larger cap
    • More liquid trading than HQL
    • Higher short interest than HQL, funds are adding to existing positions
    • Have about 15% of funds in private co’s via restricted stock/convertibles
    • Spoke w/ PM of both H&Q funds: Dan Olmstead – there since 2001
    • PM believes discount partially due to healthcare reform uncertainty = catalyst
    • PM believes suspension of distributions widened discount
    • PM believes share buyback will close discount, can buyback up to 10% of fund
      • Buyback was announced on 10/9/09
  • HQL: H&Q Life Sciences Investors
    • Earlier-stage than HQH, more biotech oriented
    • Smaller cap than HQH
  • BME: BlackRock Health Sciences
    • Great track record but doesn’t have the discount of HQH
• ETFs:
  • PBE: Very diverse
  • IBB: Midcaps, 120 holdings, low fee
  • XBI: Only 28 holdings but not concentrated, low fee
  • PBTQ: 43 holdings, 20% foreign, low volume, high fee
  • DBR: Wisdomtree INTERNATIONAL healthcare ETF, weighted by dividends paid
    • This makes it a good LT holding but not necessarily a ST strategy

Other Notes:

• Slowing growth rates for the mega-firms will spur acquisitions of smaller firms to inorganically boost growth rates and to buy pipeline/technologies instead of self-funding internal R&D.
• Biotech stocks have historically traded around 20x PEs and are now in the 14-15x range.
• BUY BEFORE THE HEALTHCARE DEAL IS ANNOUNCED. SHOULD BE A SELL THE RUMOR, BUY THE FACT RALLY.

Strategies For Uncertain Times: Closed-End Fund Fund-of-Funds (CEF FoF) and CEF arbitrage

Overview: When it comes to closed end fund (CEFs) arbitrage, I focus on buying CEFs trading at unusually large discounts to NAV in either sectors or asset classes in which I want long-exposure, or trying to arbitrage the discount itself. I incorporate analysis of which funds are most-likely to mean-revert to their historical discount to NAV, which generates price appreciation, and makes the “CEFs at a discount” a strategy on its own. Additionally, I hedge certain CEF positions with offsetting short positions against the underlying assets of the CEF and hope for mean reversion of the discount, which is commonly called closed end fund arbitrage. CEFs are complex and unloved, which means doing your own homework is required, particularly as it relates to holdings, distributions, tax considerations, and discount/premium changes.

Closed end fund Fund-of-Funds (CEF FoF) seek to generate current income and capital appreciation from the CEFs that they hold, and can be hedged or arbitraged in many cases by shorting against the CEF FoF to try an exploit the inherent double discount of a CEF which trades at a discount that hold other CEFs that are also trading at discounts.

Closed-End Fund Fund-of-Funds (CEF FoF)

Overview: Captures widening CEF discounts and generates consistently high current income. CEF distributions are fully-taxable as ordinary income so only hold them in a tax advantage account.

• CEFs:
  • FOF: Cohen & Steers Closed-End Opportunity Fund
    • It’s a fund of funds for CEFs that are equity & income oriented
    • Very diversified, CEF expert picks the investments
    • It’s a play on CEF discounts in general, just buy FOF for the yield
    • 0.95% annual fee
    • EFFECTIVE discount is almost double b/c the CEFs that FOF buys are already at a discount
• ETFs:
  • GCE: Goldman CEF FoF ETN
    • Buy CEFs at a discount
    • 1.0% annual fee

Other Notes:

• Good arb is to be long FOF at a discount and short GCE (which is at par) against it

Strategies For Uncertain Times: Global Real Estate

Overview: I buy mostly CEFs trading at a discount which can be held long-only or arbitraged by shorting various real estate indexes. The CEFs have unusual properties (pun intended) including high leverage and high current income from REIT dividends. This is also a contrarian investment on a turnaround in the real estate markets. Real estate, both in the US and internationally, falls into two main buckets: commercial and residential. Residential real estate investments are primarily made by investing in RMBS fixed income (residential mortgage backed securities) and are a very, very unusual investment given the dynamics of the US residential real estate market. Commercial real estate can be general purpose office buildings, medical facilities, shopping malls, etc. Commercial real estate companies can be purchased directly as many are listed and structured as REITs (real estate investment trusts), and there are also real estate service firms like CB Richard Ellis that are dependent on commercial real estate market trends. CMBS (commercial mortgage backed securities) are also an option on the debt-side, but the uncertainty regarding that particular sub-segment of the ABS (asset backed securities) market and I avoid it entirely given my inexperience with actual CMBS investing.

Global Real Estate

Overview: Roughly 0.3 beta vs. S&P. Contrarian play on turnaround in real estate. High dividends income. Probably best to hold in a tax advantaged account because of the high income from REIT holdings which gets taxed at ordinary tax rates (REIT dividends don’t qualify for low dividend tax rate).

• Open-end mutual funds: The open end funds are not as global as the CEFs
  • TAREX: Third Avenue Real Estate Value
    • 56% international
    • 1.1% annual fee, no load
    • 5 year annualized return of 1.5%
    • 30% std dev and 1.1 beta vs. MSCI on 3 year basis
    • Avg cap is medium although is across all caps
    • 17 positions
    • 30% annual turnover
    • About 20% Hong Kong
  • ARIIX: Alliance Bernstein Global Real Estate II
    • 64% international (more international/global than TAREX)
    • 5 year annualized return of 1.9%
    • 30% std dev and 1.1 beta vs. MSCI on 3 year basis
    • Avg cap is medium although is across all caps
    • 14% Hong Kong
    • 95 positions
    • About 60% annual turnover
• CEFs:
  • AWP: Alpine Global Premier Property
    • Estimated avg discount is 12% (only 2.5 years of history in unusual situation)
    • Current discount is 21%
    • Monthly distributions, does NOT have managed distributions
    • US is 33%, but beyond that it’s the most geographically diverse
    • Very liquid, very big fund
    • Entirely equities
    • 1.45% annual expense
    • 138 holdings
    • Does not use leverage, but can (no further discount, but have upside optionality)
    • Already cut distribution 8 months ago, more likely to get raised, not cut
    • Equity REITs have relatively stable balance sheets (debt to total capital)
    • Commercial MBS will face the most trouble, they don’t touch it.
  • DRP: DWS RREEF World Real Estate & Tactical Strategies
    • Estimated avg discount is 14% (only 2.5 years of history in unusual situation)
    • Current discount is 21%
    • Monthly distributions, does NOT have managed distributions
    • 80% equities, the rest is preferreds, debt, and covered calls
    • US is 27%, 15% Australia, 14% Hong Kong, 12% UK, then Japan
    • 1.38% annual expense
    • 119 holdings
    • $90m total NAV, much smaller than $633m for AWP
  • SLS: Riversource LaSalle International Real Estate
    • Estimated avg discount is 14% (only 2.5 years of history in unusual situation)
    • Current discount is 23%
    • Quarterly distributions, does NOT have managed distributions
    • US 16%, Australia 21%, Japan 14%, then UK, then France
    • 1.26% annual expense
    • Entirely equities
  • IGR: ING Clarion Global Real Estate
    • Monthly distributions and DOES have managed distributions
    • Current discount is 13.5%
    • Very liquid, largest of the CEF RE funds at $1.36bn
    • 1.28% annual fee
    • 53% US, 12% Australia
    • 74% equities, 25% preferreds
    • 5 year avg discount is 8.6%*** good reference for the younger RE CEFs
    • 71 holdings, extremely low turnover
• ETFs:
  • GRI: Cohen & Steers Global Realty Majors
  • RWX: SPDR Dow Jones International Real Estate
  • DRW: WisdomTree International Real Estate
  • WPS: iShares S&P Developed ex-U.S. Property

Other Notes:

• Have to get the portfolio holdings info from the fund mgmt sites themselves

Strategies For Uncertain Times: US Real Estate

Overview: I buy mostly CEFs trading at a discount which can be held long-only or arbitraged by shorting various real estate indexes. The CEFs have unusual properties (pun intended) including high leverage and high current income from REIT dividends. This is also a contrarian investment on a turnaround in the real estate markets. Real estate, both in the US and internationally, falls into two main buckets: commercial and residential. Residential real estate investments are primarily made by investing in RMBS fixed income (residential mortgage backed securities) and are a very, very unusual investment given the dynamics of the US residential real estate market. Commercial real estate can be general purpose office buildings, medical facilities, shopping malls, etc. Commercial real estate companies can be purchased directly as many are listed and structured as REITs (real estate investment trusts), and there are also real estate service firms like CB Richard Ellis that are dependent on commercial real estate market trends. CMBS (commercial mortgage backed securities) are also an option on the debt-side, but the uncertainty regarding that particular sub-segment of the ABS (asset backed securities) market and I avoid it entirely given my inexperience with actual CMBS investing.

US Real Estate

Overview: Roughly 0.3 beta vs. S&P. Contrarian play on turnaround in real estate. High dividends income. Probably best to hold in a tax advantaged account because of the high income from REIT holdings which get taxed at ordinary tax rates (REIT dividends don’t qualify for low dividend tax rate).

• Open-end mutual funds:
  • CGMRX: CGM Realty Fund
    • 0.86% annual fee, no load
    • 5 star Morningstar, managed by Ken Heebner
    • Only 20 positions, avg is midcap but has large, mid & small caps
    • 5 year annualized return of 11.7%
    • 39% std dev and 1.66 beta vs. S&P on 3 year basis
  • TRREX: T. Rowe Price Real Estate Fund
    • 0.75% annual fee, no load
    • Has about 40 positions, smaller cap than CGMRX
    • Lower turnover than CGMRX
    • 5 year annualized return of 0.5%
    • 41% std dev and 1.71 beta vs. S&P on 3 year basis
• CEFs:
  • NRO: Neuberger Berman Real Estate
    • Monthly distributions
    • ½ preferreds, ½ equities
    • NO managed distributions
    • 1.4% annual fee
    • Very liquid trading
  • RFI: Cohen & Steers Total Return Realty Fund
    • NO leverage
    • DOES have managed distributions, but distributes quarterly
    • Low fee of 1% annual
    • 16 year track record
• ETFs:
  • FRI: First Trust S&P REIT Index Fund
  • PSR: PowerShares Active U.S. Real Estate Fund
  • ICF: iShares Cohen & Steers Realty Majors Index
  • IFNA: iShares FTSE EPRA/NAREIT North America Index
  • UMM: MacroShares Major Metro Housing Up Shares
  • DMM: MacroShares Major Metro Housing Down Shares

Strategies For Uncertain Times: THE OVERVIEW

I believe that tremendous uncertainty supports the adoption of hedge fund replication strategies.

At the end of 2008 I felt very certain that, given the oversold levels of various equity markets around the world, a basket of China, India, and LatAm (Brazil) were extremely likely to experience very solid price appreciation. Multiples for their respective indexes were lower than they were in the US (which is rare) and I knew that emerging market economies will precede the US coming out of the trough of the macro cycle. Additionally, their macroeconomic situations were comparatively healthy versus the US. In retrospect, it was a no-brainer and a huge winner. I nearly bottom-ticked those equity markets and ended up doing extremely well on a percentage/relative basis as their TTM performance has been stellar.

This year I have the entirely opposite mindset: I have ZERO idea what will happen to equities over the next two years and I think anyone who says they do is selling a theory that they can’t realistically support as actually PROBABLE. Hence, I’ve put together a list of strategies/asset classes that, in aggregate, satisfy my desire to make money over the next year or two. Some ideas are targeted at generating current income, some ideas are targeted at capturing potential equity market appreciation, and some ideas are just uncorrelated strategies or asset classes that offer non-equity means of potentially increasing in value (income plus price appreciation).

Some people refer to compiling these strategies and/or adding non-equity  asset classes  as “hedge fund replication” whereas I just call it considering your alternatives (zing). I believe that, while unlikely to repeat the huge outperformance of my portfolio this over past 12 months, this strategy should produce sold tax-managed returns with favorable volatility over the next one to two years. This is really just a study I prepared for myself (AKA The Dan-Don’t-Be-Broke-Portfolio), but you might find some interesting info for yourself.

There is a considerable amount of disagreement about the definition of the term “hedge fund replication” but, to me at least, it means any combination of three things: 1) not being exclusively long equities (long only), 2) maintaining short exposure as a hedge against bearish moves in equities or the economy overall, and 3) looking at various asset classes and strategies that seek to generate uncorrelated or low-correlation returns with equities.

Clearly 2008 demonstrated that many “hedge funds” were not appropriately hedged, if at all. If the S&P was down 30%+ in 2008 and hedge fund XYZ was down roughly the same amount, then they did not come close to producing returns for their investors that were either 1) positive on an absolute basis (greater value at end-of-period than at beginning-of-period), or 2) positive on a relative basis (lost less value on a percentage basis than the S&P, which is admirable but still fails to increase investor wealth), and 3) most likely generated a return that was highly correlated with the performance of the S&P, which is not acceptable given that investors pay high fees to hedge funds in the expectation that they do NOT produce results similar to what the overall equity market does.

This list is not inherently “fully hedged” or “market neutral” but the list (when aggregated as a portfolio) has a correlation with the S&P of less than 1.0 and potentially has the ability to increase in value even if the S&P falls.  Obviously, my allocation to each of these strategies will vary greatly depending on changes in value, and I might not even currently employ any one of them at all.

Non equity asset classes:

-Commodities

-Debt (emerging market)

-Debt (floating or variable corporate)

-Muni bonds

-Closed end fund (CEFs) arbitrage

-Private equity and/or venture capital (PE and VC)

-Currencies

-Convertible bond arbitrage

Equity-based strategies:

-Merger arbitrage and special situations

-Closed end fund Fund-of-Funds (CEF FoF)

-Biotechnology

-Stock buyback funds

Covered call funds (buy-write strategy)

Real estate (US and/or international)

Long/short equity (partially hedged or market neutral equity)

Managed futures (this can mean several things)

—————————-

I have prepared my own investment guide that spans all of these strategies. You can download it by clicking here.

Strategies For Uncertain Times

I prepared it awhile back, so it may not reflect current market conditions, valuations, or discounts. It is based on my own financial situation, goals and objectives, risk profile, and tax considerations. My picks/selections are bolded, there may be two per strategy/asset class. In many cases I prefer closed-end mutual funds (CEFs) b/c they trade on an exchange like stocks, and frequently trade at discounts to their “net assets” per-share, which occasionally creates a built-in margin of safety. I will continue to hold a good portion of emerging market equities, which I trade in and out of depending on valuation on price changes. I hold HAO for China, GML for Latin America, RSX for Russia, and EPI for India. I just typed up my handwritten notes, so there are plenty of abbreviations, typos, and short-hand notes. The format isn’t meant to be anything more than acceptable, so just call me if you have a question about what something means or what I’m thinking.