My column on the DPF India fund prompted a lot of mail that I thought best to answer here. First, yes, there are substantial fees involved including a hedge-fund-like bonus structure. I should have pointed this out in my column. I didn’t because in my view the fees are worthwhile since it’s very difficult to buy Indian stocks as the market is regulated. Cost of doing business.
Second, some saw an inconsistency between that column and another on the IPO of a Middlefield closed-end fund. But that’s not right. I advise avoiding these things on the initial public offering because you literally can’t win. Buying them at a discount when there are no warrants outstanding can be a good idea if you think the conditions I outlined in the DPF column exist – rising NAV and narrowing discount.
I think the manager of the fund, Goodman, which is part of the Dundee family, wants to close the discount because they want to issue new units. I don’t think they’ll do that at a discount. I would certainly think that would be worth a column if they did and it wouldn’t be a favourable one obviously.