Why do some Citadel funds trade at a discount to NAV and some at a premium?
Generally, the price of a closed end fund fluctuates depending on supply and demand in the market. In simple terms, when demand exceeds supply, the market price may be at a premium to net asset value. When supply exceeds demand, the shares trade at a discount. Premiums and discounts can be influenced by a wide variety of market forces, including yield compared to competing products, investor sentiment concerning a managers’s expected performance, the presence of share repurchase features, as well as fund duration. Investors look to exploit discounts in a fund’s net asset value by purchasing the fund at a discount to NAV, which means they get higher yield since distributions are based on NAV. It’s important to remember that discounts and premiums are only one measure of the attractiveness of any fund and in-depth analysis is needed to determine if the fund is suitable to meet an investor’s needs.
