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Industry Insight: Thoughts From This Week's CEFNetwork Conference

Avail yourself of the video replays from the only investment conference focused on closed-end funds.

Mike Taggart, CFA, 12/14/2012

This week, Pristine Advisers hosted its second-annual CEFNetwork conference in New York City. As the only conference in the United States focused solely on closed-end fund investing, it has already become a big deal for those of us focused on CEFs. Most of the day was spent on presentations from individual CEFs, outlining their views on macro events and the current construction of their portfolios. Interspersed were discussions about CEF investing in general. For those interested in viewing the CEF presentations, Pristine Advisers has posted the webcast videos here.

Like last year, I served as the moderator for two panels. With the first, which consisted of three presentations about emerging-markets closed-end funds, I merely acted as a clock watcher, ensuring that the presenters stayed within their time limits. Khiem Do, portfolio manager of the Asia-Pacific Fund APB, walked through current themes in his portfolio and provided interesting details on the state of Asian-Pacific economies. Anyone interested in that part of the world will want to invest 30 minutes to watch his presentation, which he delivered with his customary humor. James Upton of Morgan Stanley, which sponsors several CEFs including Morgan Stanley Emerging Markets MSF, focused his presentation on the increasing dispersion of fundamentals when it comes to emerging markets. He stated that even the term "emerging markets" is becoming passe, as it is increasingly difficult to speak of the individual countries as sharing similar characteristics. Those interested in emerging-markets investing would benefit from watching the replay of Upton's speech and familiarizing themselves with Morgan Stanley's view of the world. Finally, Eduardo Solano of the Mexico Fund MXF presented. One of the best things about conferences such as this one is the exposure to facts we may have otherwise overlooked. The Mexican economy and stock market have been performing very well, and Solano walked investors through the underlying causes.

My second panel was quite crowded, consisting of myself and five panelists. It was a broad-ranging discussion on various CEF topics. As it was the final panel of the day, the conference organizers asked me to pep up the audience. This was an easy task, as I know most of these panelists and they need only the slightest encouragement to loosen their ties. The result was a very lively, at times even humorous, 50-minute discussion, capped off with a couple of very interesting questions from the audience. From feedback I've received, the conference organizers' wishes were met. So, if you are looking for some frank discussion on serious CEF topics, then I would recommend the replay.

While I thoroughly enjoyed my own participation on panels, perhaps the most interesting panel for me was the one consisting of fellow sell-side analysts. Moderated by Ken Fincher of First Trust Advisors, this panel is a must-see for anyone interested in CEF investing, in my opinion. When it comes to CEF investing, these folks are among the heavy hitters, and unless you are a client of their firms, you won’t often get to hear their views. The panelists each had about five minutes to discuss the topics they had been assigned. For instance, Mariana Bush of Wells Fargo Advisors laid out the return of capital issue in about three minutes--impressively with no supporting slides--and discussed how to avoid overreaching for income. If you are a consistent reader of our articles and you watch the replay of this panel, you should come away with a very clear understanding of how the views of Morningstar's CEF team compare and contrast with the standard wisdom of Wall Street.

Transparency, as readers of our articles know, is a big deal when it comes to CEF investing. This conference plays an important role in bringing information to investors about CEFs. It’s not often that smaller, internationally focused CEFs have an opportunity to present in front of an audience. Pristine Advisers serves the CEF community well by hosting the event and by partnering with BrightTALK to ensure that the presentations are webcast and available for replay to a much broader audience than can be gathered in a midtown Manhattan hotel. A sure sign that the conference’s importance is growing was the attendance of several executives from nonparticipating CEF firms who took the time to travel to New York and attend the conference for the full day.

The CEF industry has long needed a proactive platform through which to engage investors more fully in the vagaries of CEF investing and upon which to highlight often-overlooked funds. That CEFNetwork is filling this void was the topic of most of the side discussions that I had during the day. For investors concerned that such a platform promoting CEF transparency will ruin the CEF market inefficiencies from which they profit, I say: Have no worries--just as not every CEF investor reads our articles, not every CEF investor will attend this conference or watch its video replays. Inefficiencies will remain, and watching the replay videos will only serve to enhance your edge over the average CEF investor. Education is still the best tool for exploiting those inefficiencies.

Click here for data and commentary on individual closed-end funds.

Mike Taggart, CFA, is the director of closed-end fund research at Morningstar.

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