Description

This article is from the A Guide to Closed-End Funds (CEFs).

Premium/Discount of the Mexico Equity & Income Fund

For much of 1994, the Mexico Equity & Income Fund traded at most premiums, and towards the end was trading at a modest discount. However, the devaluation in the peso at the end of 1994 and the concurrent collapse in the Mexican stock market, resulted in a sharp drop in the NAV from around 17.8 to 10.2, a drop of 43%! However, in the same period, the market price moved from around 18 to 13.75, a drop of only 24%. To reflect this difference, the Mexico Equity & Income fund was trading at a sharp premium of 35%. A similar phenomenon was seen in the other Mexican CEFs. In passing, we should mention that this unusual type of protection for the CEF investor was not available to the mutual fund investor: someone investing in the comparable mutual fund (Wright Equity Mexico Fund) would have lost 40% or so.

 

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