Gabelli Go Anywhere Fund Cumulative Puttable Preferred Stock


Leave it to Mario Gabelli and his team to come up with different varieties of preferred stock to raise cash for a closed end fund–in this case the closed end fund is the Gabelli Go Anywhere Fund (AMEX:GGO).  As the name indicates the fund can own securities from any sector of the marketplace–stocks, bonds from any foreign and domestic issuers.  The fund is about $55 million in size.

As we reviewed this fund it became obvious to us that the ones making out the best with this fund is the Gabelli Funds LLC  as total return since inception in mid 2016 is negative–that’s hard to do with the stock market up as much as it has been over that time frame (the SP500 is up around 20%).  We do note that the net asset value of the fund has been flat over the last 9 months.  All in all the Go Anywhere Fund is a pretty lousy CEF.

In spite of the lousy performance of the CEF they fund part of their investments with a Cumulative Puttable Preferred Stock–the preferred stock is unrated.  Being a closed end fund the company is required to maintain at least a 200% asset coverage ratio on senior securities which, as a preferred stock holder, provides the safety we love.

The preferred stock was originally issued in July, 2016 as part of a combination share which was sold for $100/share.  This represented 3 common shares  and 1 cumulative, puttable preferred share.  This combination share traded on the exchange until November, 2016 when the common and preferred shares were split and commenced independent trading.

The preferred shares traded around $54 to start, but only carry a liquidation preference of $40/share.  The giant kicker was the preferred carried a 8% coupon during the 1st year.  By the middle of 2017 the preferred shares had fallen to the $44-45 area as the ‘teaser’ rate was set to come to an end.

For years 2 and 3 the preferred shares pay a coupon of 5% (based on $40/share liquidation preference) meaning a 50 cent/quarter distribution.  After this time the distribution will be at a rate of 200 basis points over the 10 year treasury, but NOT LESS than 5% nor more than 7%.

Holders of the preferred stock will have the option of ‘putting’ the shares to the fund at $40/share in 2019 and 2021.  After the second ‘puttable’ period the shares will become perpetual preferreds with normal terms of redemption applying.

An addition factor of this preferred stock is that the CEF is required to make a tender offer for any and all common shares in 2021.  If all shares were tendered the CEF would in effect be liquidated and preferred holders would be paid at $40/share.

It should be noted that this preferred issue trades “by appointment”–meaning tight limits and patience is required to purchase shares.  Shares last traded at $42/share meaning a current yield of 4.8%.

We are considering trying to purchase a small 100 share sampler for the Medium Duration Income Portfolio as it fits the needs of the conservative investor.  A bit more due diligence is needed before we buy.

We encourage anyone with an interest to read the offering documents which can be found here.

This is not a recommendation for anyone to purchase these shares as we don’t ever make recommendations of buy or sell to anyone (except ourselves).

9 thoughts on “Gabelli Go Anywhere Fund Cumulative Puttable Preferred Stock”

  1. Interesting commentary:

    “The U.S. central bank does not have to raise interest rates further, as monetary policy is close to “neutral,” said St. Louis Fed President James Bullard, on Wednesday. “It is not necessary in this circumstance to raise the policy rate further in order to put downward pressure on inflation, since inflation is already below target,” Bullard said in a speech to a meeting of the Arkansas Bankers Association meeting in Little Rock, Ark. The neutral setting of the policy rate is a value that puts neither upward nor downward pressure on inflation. There is no consensus on what that rate is. Bullard is in a minority at the Fed. Most officials believe the neutral rate is higher. “

    1. I agree on that statement relative to short term rates. The long term rates will be determined by the marketplace and that is where the danger lies I believe.

  2. Yep–looks like another wild ride day. The way things are going markets could end up green before the day is out. I think the yield curve flattening will be interesting to watch and I would say ‘this time is different’. We have never had a 4 billion dollar Fed balance sheet in runoff mode or needs to finance a trillion dollar deficit at the same time. I don’t think it will flatten much more (if any)–something has to give.

    The 10 year popped yesterday, but looks lower today.

  3. On another note, interesting discussion on Bloomberg this morning.
    They were discussing how an inverted yield curve “usually” indicates a recession is coming/happening. HOWEVER, historically speaking, this has happened ONLY during times when the Fed had raised rates “too high”, like in the 4%+ range.

    That’s not the case now with us sitting at 2.76%. So, this canary in the mine might be on the herb, so to speak. With a move closer to inversion, it may not actually mean all bets are off.

    Interesting stuff… Strap your helmets on guys, it’s going to be a very rough day for those of us with significant holdings on the common stock side of the field. My first play is to grab some DOG, which is an inverse DOW Proshares short.

  4. That Mario has an imagination – the expenses on this one are sky high (over 8% the first year).

    1. Does he gouge on all of them? GDL laps up the fees nicely, too. He seems to set up nice preferreds and mediocre funds behind them. Maybe that is their purpose…He personally owned 18% of the GDL-B preferred. And you can bet he upgraded all of them to the C issue, also, lol..

      1. No I don’t think that he gouges on all–but on this one he did–I believe that the distributor of shares was a Gabelli company and they were paid $3 per original share. In the end all CEF advisors/sponsors are looking to make a buck. Always the same old story–follow the money.

        Of course as you know Gladstone is learning this game as well–self distributorship.

        1. Gabelli seems in line with some expenses and out of whack with others (provided my source is right on these numbers):
          GUT: 1.71%
          GAB: 1.45%
          GDL: 4.84%

  5. Tim, this is one goofy issue. I studied it some, but I need closer to $41 for me. Dont know if it will get there. And you are correct, this thing doesnt trade much…In fact since early October which was 6 months ago, only 2800 shares have traded. A huge big fake bid/ask is always posted, too usually.

Comments are closed.