HM1 shows why trading Closed End Fund discounts is so difficult even experts pull the pin

It's a bad sign when even the top experts in trading LIC/LIT discounts decide to dump the one you own.

1. Regarding top expert, judge for yourself. I write the blog: www.captivecapital.org

2. Regarding dumping HM1, I dumped my entire self-managed super holding (136,193 shares) on 20 Sept and 21 Sept.



3. You can read about the one positive edge I had in HM1 in this post: > HM1 - Hearts and Minds Investments - Cheat Sheet

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HM1 now persistently trades at ~15-20% discounts and often pops up on the radar of investors targeting ASX CEFs. In this post, I reveal how, in LICs, tax leakage, franking credit balances, and dividend policies can significantly affect the NTA and investor outcomes. Franking credit balances are not counted in published NTA in LICs, and HM1 indicates the complexity and expertise involved in assessing true discounts, and whether they are likely to revert before the holding costs (plus any underperformance) outweigh any gains.
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4. However, the half-year dividend got paid and the discount temporarily came in from 22% to ~14%. Yet, HM1 is beset with issues and massive underperformance that deserves a discount over 20%! I couldn't hedge it effectively so I was finally forced out.

You can read about these issues on the Hearts and Minds Investments Insights blog I'd set up to try and force positive changes:

> Hearts and Minds Investments Insights blog - About

> HM1 NTA return and TSR each financial year and since inception

If HM1 trades at a huge discount (over 22%) again, I may be back in and continue my efforts. But for now, I leave investors with the resources above. And I may provide further details on how appalling the stock-picking performance has been, and how this underperformance ultimately overwhlems most discount trading opportunities.