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Alpine Global Premier Propertie Message Board

  • bluebuick2003 bluebuick2003 Oct 12, 2011 12:12 AM Flag

    info on AWP and CEF's (part ii)

    this is part ii unfortunately i have to retype part i, i got timed out on the internet and lost it.

    WHY IT IS HARD FOR A CEF LIKE AWP TO PAY
    10% EVERY YEAR W/O A DECLINE IN TOTAL VALUE.

    so what i'm saying here is you might continue to get the dividend but the value of your original investment may go down such that the total return is not 10%.

    when an investment bites the dust, cash is needed to invest/avg down. if you invested $50k in AWP on june 30, 2011, you had $32k as of 9/30/2011, down 36%. the figures are roughly the same for XAWPX (AWP NAV, the money that alpine is managing). if don't have any money to put in, then you need to make 56% to get back to even. if you invest another $50k, bringing your investment to 82k, you only need a 22% return to get you back to the orignal 100k (invested 50k twice).

    AWP is pretty much fully invested at all times and doesn't have any new money coming in. so they don't have the opportunity to avg down. you as an investor can avg down on your AWP but alpine mgmt can't. they have div money that comes in but that goes right out the door. the can borrow money but that just adds risk. so each time there is a significant downturn in the market, CEF's like AWP and AOD have a problem on their hands.

    many equity CEF's write covered calls, that brings in new money and helps make the dividend payment. if they pay 10% and collect 3% from the investment via dividends, maybe they write calls and get another 3% so that puts them a step ahead of funds that don't.

    SUMMARY

    as i've noted in a few posts, i bailed on CEF's as i tracked my investment in them versus my investments in SPY (versus equity cef's) and RWR/RWX (versus AWP). although i never did own AWP, i owned AOD, AGD, BOE, and ETO. in my opinion, one of the best ways to make money is AVOID LOSING MONEY. that means you have to have cash on hand at all times. if you are always 100% invested, it can be real tough. you better be a good stock picker and not be sending 10% of the money out the door every year. and why pay investment mgr’s the fee when it is pretty simple to buy etf’s that perform in a similar fashion.

 
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