There are two kinds of DRIPs:
1) Administered by the fund (CLM)
2) Administered by the broker.
If you are enrolled in #1, your new shares are bought at NAV
If you are enrolled in #2, your broker buys new shares in the open market.
Some brokers (like Ameritrade) do support the fund DRIP plan, but you have to call up to make sure they enroll you. The default at most brokers is #2 (administered by the broker).
History repeats itself. If you look at historicial discount charts for the Cornerstone funds, the premiums usually widen the first half of the year.
I like your idea of selling RO shares at 103% NAV.
Reducing the CEF ratio to 30% is probably a good idea longer term, but recently the CEFs have been doing pretty well with narrowing discounts. Maybe they could do this gradually over time, opportunistically trading out of a CEF when its discount shrinks.
Hi houtech- I agree. Management has a real incentive to get the CLM premium up to 10%. Maybe they will do some insider buying : ) if they can't get the premium up, we may see another fund merger at some point.
Two reasons to buy-
1) Ability to re-invest distributions at NAV.
2) If you use a prime broker, or are high net worth, you can arrange to receive some of the short sale rebate fees.