Subject category:
Finance, Accounting and Control
Published by:
Ivey Publishing
Version: 1998-11-16
Length: 10 pages
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Abstract
An analyst with Alpha Investments is examining the possibility of recommending that shares in the closed end mutual fund, Growth Investment, be included in the portfolio holdings of managed funds run by Alpha. Growth Investment was a dual-purpose fund with both preferred shares and common shares. The common shares were selling at a discount of over 20 per cent to their underlying net asset value. This seemed to represent a significant investment opportunity for Alpha, especially because Growth Investment had a wind-up date in approximately three years at which time the common shares would be redeemed at full net asset value (less any wind-up costs). Before making the recommendation to buy, however, the analyst wanted to be sure that she understood all the risks as well as the opportunities of the investment.
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Abstract
An analyst with Alpha Investments is examining the possibility of recommending that shares in the closed end mutual fund, Growth Investment, be included in the portfolio holdings of managed funds run by Alpha. Growth Investment was a dual-purpose fund with both preferred shares and common shares. The common shares were selling at a discount of over 20 per cent to their underlying net asset value. This seemed to represent a significant investment opportunity for Alpha, especially because Growth Investment had a wind-up date in approximately three years at which time the common shares would be redeemed at full net asset value (less any wind-up costs). Before making the recommendation to buy, however, the analyst wanted to be sure that she understood all the risks as well as the opportunities of the investment.
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