저자: DavidTepper · 외국인
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David Tepper(자막상 'David Ter')는 폐쇄형펀드(CEF)의 고전적 접근(오래된 펀드를 할인 매수)이 여전히 유효하다고 강조. 할인율이 좁아져 기회가 줄었고 자금 경쟁이 심화되어 더 민첩해야 한다고 언급. 사모신용은 경기침체 시 디폴트 우려로 서두르지 않음. 시장은 대형 기술주 쏠림이 심하며 S&P 동일가중(RSP)이 시총가중 대비 연 7~8%p 뒤처짐, 소형주(러셀2000)는 10년간 연 10% 미만으로 저조. 예측보다 구조적 관찰 중심이며 특정 자산의 단기 방향 예측은 없음.
다듬은 글
Welcome to the navigator at the active investment company alliance fall roundtable. The fall round table held in New York City at the view on the battery on Wednesday November the 19th brought together a wide range of folks in the closed end fund space. We're happy to have with us now David Ter. David Ter was last on the Navigator in September of of 2023.
And I will point out that he is the rare guest where I don't get to give you a website to say here's David Ter's website and you can check him out. You cannot do that, but he is easily found online because he is a longtime investor in closed end funds who's been very successful at it. I'm very pleased to say David Tupper, it's great to see you.
Thanks for taking the time. Chuck, uh, my pleasure. Thanks for the invitation. So, I want to go back because I doubt you remember the specifics of our conversation at the beginning of 2023, but at the time you looked at four of the oldest closedend funds. They were Adams Diversified Equity, Central Securities, General American Investors, and Trontinental.
They are four closed end funds that at the time you had owned for decades. they were trading at a a tract of discounts and which you said, you know, look, if you're looking for closed end funds that have delivered and are going to continue to deliver, these are four that are going to work. We've seen a lot of changes in the fund industry in the closed end fund space.
But is the tried and true, the go find the old ones, the the ones that have been there for a while, and if you find them on sale enough, buy them. Is that still the basic recipe here? Well, yes, I think so. you know, if if particularly if people are interested in those particular funds in capital appreciation, long-term growth of capital, they're not necessarily high yielders offering a lot of uh current income, but since we last spoke, they've all done well.
General American investors is up over 20% this year, will be making a large capital gain distribution before the end of the year. Central Securities has a very interesting holding. They there's a private insurance company that they invested in 2530 years ago, I think even longer. And the dividend that they're receiving from that company is far greater than what the value of the money that they invested way back when.
And I think that particular asset which comprises 25% of the assets of central securities is on their books at a a value that's well under what the shares could be worth if that company ever became public. The industry has seen a lot of growth and changes and there's more coming. We're going to see probably some more specialized funds.
We've seen a lot of things into private credit and private equity and some other things along those lines. How much of those attract you? Because as you said, you've been doing these for a long time. These are the classics. How much does the new stuff attract you? Well, it you know, again, um as Howard Marx, the investor, famous investor said, there are no bad investments, only bad prices that you might pay for them.
At this point, private credit is, I don't know if you'd say, under a cloud, but people worry uh legitimately about what would happen if we had a severe recession and you saw a lot of defaults in the credit space. And uh so I'm not in necessarily in a hurry to buy them, but again, at the right price, under the right circumstances, they could present a tremendous opportunity that cloud for private credit and private equity.
Everybody talks about it, but at the same time, there was a lot of talk about what was going to happen in high yield and other areas of the bond market when we saw rates increase, and we never saw a significant increase in default rates as the rate cycle changed. Now, we're in a rate cutting cycle. Do you think there's something structurally that's kept us away from the defaults or do you think no, it's a, you know, you sort of said it's a legitimate worry, but is it truly a legitimate worry?
like we'd see a significant number of defaults. Well, it it would all depend on what happens with the economy. If and when we have a recession, you you are correct. Uh rates are high. I mean, if things it looks like things are heading south, you know, the Fed could cut rates, that would give a lot of these uh borrowers more breathing room.
It would lower the cost of forclosed end funds that use leverage. So, you know, that's that's the one positive thing that could prevent a real meltdown. But I was in the business in the early 1990s when Drexel Burnham, which was the leading player in the high yield space, went under and uh it rippled across all the the closed end bond funds.
And the problem is when bad credit defaults, it's unsalable. And if a fund manager needs to raise cash to meet redemptions or for liquidity, if they can't sell the bad stuff, they wind up selling the good credits. And so that puts pressure on prices across the board. I'm not predicting this is going to happen, but you know, in this business, you never know.
Anything can happen and sometimes does. One of the things that we haven't seen a lot of of late is a lot of shareholder activism. You quoted Howard Marx talking about anything can be a good investment if you're getting it at the right price and everybody loves a good discount, but discounts at this point, they'll widen out, but they don't seem to stay wide for long.
To be a good closed end fund investor now, do you have to be more nimble? Do you have to take advantage of like suddenly the market changes and whatever and have a temporary disruption more than you did in the past? Yes, I think so. I think there there are more institutional there's more institutional type money in the closed end fund space.
You do have to be more nimble. I mean if you are really driven by discounts and I'm not saying that's the best way to some people are. I'm not saying that's the only way to invest in closed end funds but it would appear that discounts are narrow that narrower than they have been. Another reason the discounts are narrower is that some of the activists have put pressure on various closedend fund or closedend fund families to address these big discounts and they've enacted policies paying out more higher distributions that inherently have in fact narrowed the discounts.
Funds have merged. Some funds have liquidated. Uh the Pioneer Group had five or six closin funds that they liquidated them all earlier this year. They've taken money out of the pool, so to speak. So there's at least as much money chasing fewer funds and and that's another factor that has narrowed the discounts.
Fewer funds on the one hand, there's a lot of talk about what could be next and how the closed end fund business is expanding. I am curious as we did for a time see the Grayscale Bitcoin trust be a closedend fund etc but now Bitcoin and crypto funds have moved away from the closed end fund structure.
I am curious are there assets you would never want to see in a closed end fund and are there assets you wish like are you waiting for somebody to give you the AI closedend fund or something along those lines? Well, you you've mentioned a couple areas that I'm not inclined to invest in for for better or worse.
Lately, it's been worse. Crypto, that type of stuff I've steered clear of. And again, it's I've been wrong to do so. And and I'm personally don't have a big tilt towards technology. There are one or two AI that funds that do have a tilt uh towards investing in AI. Again, that's not an area that that I'm naturally inclined to to pursue.
So, what would be the area that you would be inclined to pursue that you're hoping somebody opens a closed net? Geez, I nothing comes to mind at this point in time. Let's talk generally about where you feel this market is because we've got a market that is at record highs. It's a gonna it looks like it's going to complete its third consecutive double-digit gain year.
yet there's a lot of pressure that you know that people going okay well it can't go on forever etc. Are you worried that the next step is going to be a small step down, we need to take a pause or the next one's going to be here's the recession we've all been waiting for? Well, one has to be careful and look behind the headlines.
Yes, the standard pores has had great returns, but again, uh those returns have been driven by a very, you know, less maybe 10 or 20 of the 500 stocks in the S&P. If you compare how the S&P has done on an equal weighted basis where every stock is weighted in the same there's a ETF symbol RSP that represents the S&P 500 equally weighted you'll see the difference in return versus the S&P 500 ETF spy at the last time I looked it was 750 800 basis points lagging the cap weighted S&P.
So in in fact we could see a period where the smaller stocks outperform while the the big cap nifty or the the magnificent seven so to speak uh lag and another area of the market that you know has lagged badly over the last several years is small cap. I think over the last 10 years, again, ballpark numbers, the S&P has returned in the mid- teens annualized over the last 10 years, whereas the S&P 600 or the uh Russell 2000 small cap has an annualized return of less than 10%.
So, not all stocks are undervalued or overvalued. and and uh going back to the dotcom bubble that burst around 2000 in the subsequent years uh small cap stocks did very well utility stocks did well did very well while the big cap you know the oracles and the Cisco and the Intels the Microsofts you know some of those stocks were down well over 50%.
It's as the saying goes it's a market of stocks not a stock market. Well, thank you so much for taking the time to talk with us about it. David Ter, great to have you join me here. Thank you, Chuck. Always a pleasure. The Navigator is a joint production of the Active Investment Company Alliance and Money Life with Chuck Jaffy.
Yep, I'm Chuck Jaffy. You can learn all about my hourlong weekday show at moneylifehow.com or you can find it on your favorite podcast app. Meanwhile, if you're looking to learn more about closedend funds, if you want to be in an event like the active investment company alliance fall round table, go to aicalliance.org.
It's the website for the active investment company alliance. Thanks to my guest David Ter from Ter Capital Management. Again, normally we give a website, not today, but you can find him online if you want to. You can find us here each and every week, whether we're in New York or at an AKA event or any place else.
But if you don't want to miss it, go find us on your favorite podcast app and subscribe. And we'll be back next week with some holiday themed closedend fun. Until then, happy investing everybody.
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