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Schultz Investment Advisors
manages individual portfolios of closed-end mutual funds for
both individual and institutional investors.
Closed-End Mutual Funds. This
overlooked and underutilized investment group is often
misunderstood by the investing public and even by many
professional advisors. While it is true that closed-end funds
have the potential to carry more risk than other investments
and require a greater level of research and understanding, the
rewards to the investor can also be greater.
Philosophy. SIA believes that, with
careful analysis, closed-end funds can and should be employed
in the asset allocation strategies of many investors. The SIA
philosophy is based on the fact that closed-end funds are
essentially mutual funds that have the potential to be
purchased at a discount—i.e., at less than their net asset
value. Buying closed-end funds at a discount is similar to
“shopping with a coupon.” When SIA determines assets are “on
sale” relative to historical parameters, there can be inherent
value in owning that particular fund. SIA attempts to
consistently purchase those closed-end funds whose holdings
are in line with their client’s objectives, while paying
prices that compare favorably against those associated with
comparable open-end mutual funds.
Process. SIA utilizes its proprietary
evaluation process, in-depth research and industry knowledge
in making individual investment decisions. SIA is not a market
timing service, but rather seeks to “manage the managers” of
closed-end funds based on historical ranges of the discounts
and premiums in relation to their underlying net asset value
(NAV).
Investment
Selection. It is important to note, however, that
SIA does not “chase discounts” in choosing funds for inclusion
in clients’ portfolios. There is definitely value in owning
$1.00 worth of assets, and paying perhaps only 85 cents on the
dollar—but only if the underlying fund meets predetermined
criteria.
SIA is told what their client's objectives
are for each individual portfolio, and then attempts to choose
closed-end funds that meet those objectives. Before selecting
a closed-end fund for its "buy list,” the SIA Investment
Policy Committee conducts a rigorous examination based on a
variety of factors, including EDGAR filings, historical
discount/premium data, management experience and track record,
account holdings, 13-D filings, market sector participation,
liquidity factors, trading history and the actual vs.
perceived "float" on the fund, among other
measurements.
Fees.
Like individual equities, closed-end funds generally trade
with a commission for each transaction. SIA does not believe,
however, that commissions are consistent with the philosophy
of aligning itself with clients’ interests. SIA, therefore,
charges clients only an annual management fee based on the
assets in their SIA portfolios. SIA absorbs all trading
costs.
Reporting.
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