Essential Investment Partners, an independent investment counsel and wealth management firm, presented an overview of closed-end funds (CEFs) as a unique investment opportunity. The firm, with over $120 million in assets under management, specializes in wealth management for both individual and third-party adviser clients. Two main portfolios, the Essential Growth Portfolio℠ and the Essential Absolute Return Portfolio℠, are available as separate accounts.
The presentation highlighted the characteristics of CEFs, including their closed-end structure that allows for leverage, amplifying yield and net asset value (NAV) volatility. The fixed pool of assets and regular offering schedule make them attractive to fund managers and brokers. However, the CEF market is relatively small and illiquid, with limited professional research coverage. It requires contrarian instincts and diligence to navigate successfully. Opportunities in the CEF market arise from various factors such as corporate actions, fund mergers, tender offers, reversion trades, interest rate fluctuations, dividend cuts, and trading anomalies. The presentation emphasized the importance of constant screening, understanding underlying assets and management style, identifying red flags, and timely execution. The performance of the Essential Absolute Return Portfolio℠, along with important regulatory disclosures, was also provided.
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