The buying at a discount with the expectation the discount will invariably close has burnt numerous investors in closed funds. It's this advice which has seen numerous people buy up closed funds only to see the discount increase over the past 5 years.
The current thought, from a range of fund managers. is that a circa 10% discount can be justified for the risks associated with a closed fund.
That is, investors are entitled to a discount when investing in a fund with closed capital and a lack of liquidity for most funds in the Australian market.
Not that this helps the poor people that buy at NAV or in extreme cases like WAM for an outrageous premium.
I see the case of OPH as a prime example of the flawed nature of closed funds. Here you have an excellent manager, providing access to management usually confined to wholesale investors, yet it still trades well below NAV.
The question of whether the ongoing discount sagas reflect the growing distaste for closed funds or the continuing dominance of passive investment remains unanswered.
Ideally, I would hope Ophir opens their funds management business to retail investors...
I am sure the buyback will ease pressure for the time being, but that doesn't provide a solution to the long term problem.
OPH Price at posting:
$2.59 Sentiment: None Disclosure: Not Held
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