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closed-end management investment company
Those who have held this fund for a long period of time have rode Bill Gross's legacy successfully despite long odds. The adage that eventually the market will seek fair value has been disproved for years with some of hte Closed End Funds he manages. PGP got a little bit of a wakeup this morning, dropping 15% on the news of Gross's exit from Pimco, but has gained 10% of that back, showing that while some sense that good things must end, some will continue to look at dividend yield with blinders on. The Fund is closed end, meaning that it doesn't use new money to buy new shares at the current funds value, (NAV). Some funds vary from NAV by a few percent either way, but few get this far out of kilter...over 70% premium to the underlying value of the equities it holds. This means that each month it pays out one of the large dividends, weighing in at 9% annual adjusted, it is giving back shareholders part of their money by liquidating holdings. Fine if you only have a few years that you will need income, but not so good if you are thinking long term.The fund has fooled the naysayers partially by leveraging and borrowing money at low interest rates and reinvesting at higher. This works if the interest rate is low, and the higher paying interest rate, (corporate bonds) are secure. This has been the case, and will remain so for some time.However, eventually, some, as those who sold on the news, will realize that reality will catch up with these close end funds. If they hold up long enough, the interest will drop my cost basis, and keep me in the red, but at 70% NAV, I'll take my chances that the luster will fade with Bill into the sunset.... Looking for about a 15-20 point CAPS play....
No more Bill Gross at PIMCO should be the catalyst to take the huge and unwarranted premium away for this closed-end fund.
Price premium is over 80% per CEFConnect.
Closed-end stock fund selling at a substantial premium to NAV.
Rising interest rates may cause investors to look at different investing options.
Nav will catch-up with market value. A Large capital gains special divvy coming up in December!!!!
A fund trading at an absurd premium to asset value because it pays a giant dividend and rates are low elsewhere. Eventually it will sell for what it is worth.
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