Morningstar Advisor - June/July 2011 - (Page 55)
Morningstar Conversation
How Closed-End Funds Are Born
By Mike Taggart
Three industry veterans give a behind-the-scenes look at how an investment idea reaches the market.
The closed-end-fund business is on a roll. In 2010, there were $8.4 billion in net proceeds raised across 20 issuances—for an average of about $420 million per IPO. So far this year, seven closed-end funds have launched, attracting $2.3 billion, and the industry is on track to have an even bigger year in terms of the net proceeds. With this flurry of recent issuances, I thought it would be interesting to dig into the process of how a closed-end fund is born. The IPO—perhaps the most controversial aspect
of closed-end-fund launches—is just one component of a larger process of bringing a new product to market. To help explore this topic, I assembled a panel of experienced fund executives at the Capital Link Conference, which held its 10th annual meeting on April 27 in New York. Capital Link is the largest closed-end fund conference. Contributing to my panel were Bill Meyers, senior vice president of product development for Nuveen; Bill Golden, managing director of closed-end funds for Legg Mason; and Stephen Dougherty, CFA, head of structured assets and alternatives for
ING Investment Management. Here is a transcript of our discussion. It has been edited for clarity and length.
Mike Taggart: Let’s look behind the scenes a little bit of how a closed-end fund reaches the market. Most of us are aware of IPOs, but Bill Golden, can you walk us through the process of creating a new closed-end fund? Bill Golden: The first thing you need to focus on before you bring out a new product is your secondary market support. Unless you are
MorningstarAdvisor.com 55
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Table of Contents for the Digital Edition of Morningstar Advisor - June/July 2011
Morningstar Advisor - June/July 2011
Contents
Contributors
Letter From the Editor
Questions for the Secret Society
Are 529 Plans a Useful Tool for Clients’ College-Savings Goals?
Taking the Lead
How to Sell Covered Calls
The College-Savings Challenge
Time to Play Defense?
Four Picks for the Present
Investment Briefs
Careful What You Wish For
Caution in Utilities After Japan Crisis
Blossoms and Thorns in the 529 Garden
Lower Fees, Competitive Returns Help More 529s Make the Grade
Morningstar Grades 529 Plans
529 Risks Include the Political
Researching 529 Plans Made Easy
How Closed-End Funds Are Born
Boutique Within a Bank
The Inefficient Pricing of Moats
More Steak Than Sizzle
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The Dangers of Demonizing
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