July CEF odd lot tender offers

While the JAKK and CACC tenders haven’t yet completed a bunch of new tender offers with odd lot provisions have already been announced for July. They are for closed-end funds, and instead of a fixed dollar value per share you will get a percentage of NAV. Since they are all trading at a discount this creates an opportunity with positive expected value, but you do have market risk while holding the position. Because of that I’m going to wait till the last moment before buying, since I don’t expect that the discount will significantly change between now and the close of the tender offer.

The following funds have announced a tender offer:

Fund Ticker NAV Last Price Offer Deadline EV ($)
MS Eastern Europe RNE 15.92 14.41 98.5% July 10 126
MS Emerging Markets MSF 14.90 13.58 98.5% July 10 109
MS India Investment IIF 16.18 14.63 98.5% July 10 129
Turkish Investment TKF 15.01 13.66 98.5% July 10 111
Latin American Discovery LDF 15.08 13.95 98.5% July 10 89
China Fund CHN 23.77 21.51 99.0% July 23 200

Total expected value for all the closed-end fund tenders is 764 dollars before transaction costs, or an ~8.4% return on a ~$9,000 dollar position that you have to hold for just a few days if you want to play it safe (although I actually think you don’t need to wait before the trade settles before you can tender, so you could buy on the last day).


Not long any of the funds, but will buy between now and the deadlines.

28 thoughts on “July CEF odd lot tender offers

  1. pietje

    I think the discount to NAV is decreasing towards the expiry of the tender offer. You could see that clearly with TWN, where the discount immediately goes up afterwards due to selling pressure.

    So maybe the EV of buying earlier outweighs the market risks. For me it doesn’t matter, I have to buy them earlier anyway due to regulation, will sell my VWO position as a crude hedge.

    1. Alpha Vulture

      I would expect that the discount shrinks as soon as the tender offer is announced, and that it goes up after it is completed. What happens between those two moments would mostly be noise I’d guess. Maybe it should shrink a little bit because people trying to arbitrage would be willing to accept a smaller discount if the holding period is also shorter.

      Given the focus of the various funds selling VWO seems like a pretty decent hedge, considered doing the same myself.

  2. Bill

    Make sure you check if your broker has tender fees, which would wipe out a lot of the profit on odd lot tenders. TD, for example, has a $30 fee.

    1. Alpha Vulture

      I’m using IB, they have no fee for tender offers :). If you have to pay $30/position it would be a lot less attractive, but you would still have a decent expected profit.

      1. Danto

        OptionsHouse doesn’t have any tender fees as well, which is great along with 3.95/trade, :). I know many discount brokers have a $25-30 fee for tenders. It makes these tender offers much more attractive without a tender fee.

        1. Alpha Vulture

          As far as I know you can buy and tender US shares at the day of the deadline at IB, although you do have to do it before a specific time. But if you want to be sure contact support.

    1. ray

      Can we have a list of brokers with their corresponding tender fees? Etrade is the worst in my opinion. They charge $30 and there is no way to get it waived. Fidelity is $38, but if you are part of active trader, they waive it.

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  4. Phil

    Hi AV

    Is there any way to get updated NAVs? Are these updated daily and if so, where can I find them online? I worry that I’ll buy above the 98.5% that I’ll be offered in the tender.

    Second, are these odd lots or pure pro rata? I can’t seem to find the odd lot provisions in the press releases I read about these.

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  6. Chase DuBois

    Am I missing something here? The profit calculations here are based on the last price as the cost basis, but for most of these funds there is a wide spread. For example, the current ask price for MSF is 7.3% above the last price (at least according to Schwab). Since the ask price is the price I pay, that virtually wipes out the discount and makes the deal unprofitable.

    I know I should be using another broker anyway to avoid Schwab’s $39 tender fee, but are there other tricks I don’t know about baked into these calculations? Am I perhaps supposed to make a limit order at the last price (or a few cents above) and hope that it gets executed, even at these low volumes? How likely is it that that would work?

  7. ABV

    any resources you can share re – where to find such open tender offers? They are a nice way to earn non-correlated returns and have your cash holding pick up a small yield

  8. Baruch

    I tried to buy the IIF today, but my broker said that the deadline was 11:59 am 7/9, although the press release said 11:59 pm of 7/10, as you posted. What gives?
    (She told me that my shares may be tendered, but may not be).
    Furthermore, when I tried to at least catch CHN, which has a deadline of 7/23, she told me that the offer was only good for shareholders as of June 22. Thumbs down!
    Which leads mme to the next q: I tried googling for the official filing for full details of the offer, but it just wasn’t coming up. Even the lady that worked at TD couldn’t find it online. So please, how do we get this Letter of transmittal that the press releases refer to? (Morgan Stanley website wasn’t very helpful).

    1. Alpha Vulture

      There can be a difference between the official deadline, and the deadline your broker uses. Since your broker must meet the official deadline they often require that you tender at some point before this deadline, and sometimes you can only tender shares that are settled (requiring you to buy 3 days in advance).

      I’m pretty sure that the CHN tender offer is not only for shareholders as of June 22. They even accept a notice of guaranteed delivery, a procedure specifically for people who want to tender shares that have been bought recently and haven’t yet settled.

      You can find the full CHN tender offer, including the letter of transmittal, on the sec site, see here.

  9. Baruch

    Thanks- very helpful.
    The lady reading the form must have misunderstood- It says that June 22 shareholders received a mailing of the offer.

  10. Baruch

    One more question- do you have any experience in going over the odd lot limit to try a shot at getting a bigger position without paying double on commisions? I’m curious if the maximum offer to repurchase is met, and what kind of a pro rata I would get. I know there are no guarantees, but I would like to have an educated guess.

  11. Daniel OConnor

    I’ve obtained the prices for most of the top brokers and their tender fees-

    Etrade $ 30.00
    OptionsExpress FREE
    Firstrade $ 25.00
    Fidelity $ 38.00
    Schwab $ 39.00
    Ameritrade $ 30.00
    OptionsHouse FREE

  12. pietje

    First 5 offers expired. Made > 900$ in the CEF’s, shorted VWO as a hedge costing < 400$. Very close to EV. Easy money! Unfortunately I forgot to buy CHN and due to regulations I have to watch that one from the sidelines ..

    Anyway, this worked out as expected. And together with JAKK (~ $180), SGF (~200$) and CACC (~ $400) these odd lot tenders generate a nice profit (and certainly a nice hourly wage). Bring them on!

    1. Alpha Vulture

      Given the number of comments on this post you’re not the only one who likes easy money 😉 Expect to get paid for the first five tender offers tomorrow, but indeed looks like the profit is close to the expected value 🙂

  13. Jason

    AV, can you share the steps that you take to find them on the sec.gov website? I played around on the site as well as googled around a bit, but didn’t find an easy way.


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