Claymore has launched a closed-end fund that will automatically convert to an open-end fund if it trades at 10% below net asset value for 75 consecutive days. The Claymore/Raymond James SB-1 Equity Fund, which will invest in equities given Raymond James’ top ranking, began trading May 19. There must be a shareholder vote before the conversion.Jeff Keele, Claymore managing director, said the current environment “has forced sponsors to re-think their new issuance[s].”
Reaction in the market appeared positive, as the share price moved from $20 to $22.60 in early trading. “The open-ending provision more than anything contributed to the good perception in the marketplace,” said Tom Herzfeld of Thomas J. Herzfeld Advisors.
The last closed-end fund to sport a conversion mechanism was the Dessauer Global Equity Fund, which launched in 1997, according to Cecilia Gondor, principal at Thomas J. Herzfeld. The concept is an attempt to manage the high discounts at which many closed-end funds trade. Gondor said firms are increasingly including “lifeboat” provisions for their closed-end fund offerings, but called the Claymore fund’s provision “one of the very strongest.”