Huge Share Repurchase Announced By Highland Income Fund – Buyback Wednesdays

A little over 15 years ago, if U.S. based investors wanted to invest in India, one of the few options available to them was The India Fund (IFN) that often traded at a large premium to its underlying assets (as much as 30% if I remember correctly). This was before WisdomTree launched the WisdomTree India Earnings Fund (EPI) and the iShares MSCI India ETF (INDA) started its journey to becoming the largest India focused ETF.

What was the difference between The India Fund and ETFs like those launched by WisdomTree? The India Fund was a closed-end fund, which is an investment company that raises a fixed amount of capital through an initial public offering (IPO) and then trades on an exchange like a stock. After the initial IPO, no more shares are normally issued by the fund. Currently, there are approximately 480 closed-end funds trading on U.S. stock exchanges. Closed-end funds are actively managed and tend to charge higher fees than open-end funds or ETFs.

I was aware of three India focused ETFs (EPI, PIN and INDA) but I was curious about how much assets each of them had gathered, their expense ratios and performance over the last five years. Google’s new AI chatbot Bard proved useful and put together the following table for me.

The market price of a closed-end fund’s shares may differ from its Net Asset Value (NAV). If it trades above the NAV, it is said to be trading at a premium and if the market price is below its NAV, the fund is said to be at a discount. Discounts can widen significantly, offering investors the opportunity to purchase shares well below their NAV. A fund may be trading at a discount due to poor fund performance, improper management skills, or lower distribution levels relative to peers or to market expectations.

Closed-end fund premiums and discounts often tend to persist for long periods of time and often there has to be an external action that triggers a change in the premium or discount. The premium for The India Fund disappeared once the iShares and WisdomTree ETF became available. I also recollect the The Herzfeld Caribbean Basin Fund (CUBA) trading at a big premium after the Obama administration attempted to normalize relations with Cuba.

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