Thread by @ReformedTrader

1/ Strategic Timing in Closed-End Fund Portfolio Holdings Disclosure (Kallenos, Lesmond, Nishiotis)

"Managers of CEFs trading at high discounts are more likely to disclose earlier to reduce discounts & protect themselves from activist investor attacks."

papers.ssrn.com/sol3/papers.cf…

2/ "In 2004, the SEC adopted a new rule regarding portfolio holdings disclosure. One of the main new requirements is the mandatory quarterly disclosure of portfolio holdings of every registered management investment company within a 60-day period from the period-end date."

3/ "𝐹𝑑𝑖𝑠𝑡𝑎𝑛𝑐𝑒𝑖𝑡 is the filing distance variable that counts the days between the report period-end date and the report filing date.

"𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑖𝑡 is the average daily discount between the report date and one day before the filing date."

4/ "The figures in Table 2 indicate substantial variation in the timing of CEF filings, both within and across funds.

"For 46 out of 54 funds, the Fdistance variable exhibits a negative autocorrelation, indicating variation in the filing distance of consecutive periods."

5/ "Fdistance neg. correlated with Average Discount, consistent with H2

"Total Turnover and Return Gap(RR) pos. corr. w/ Fdistance, consistent with H3

"Fdistance pos. corr. with Return Gap(RF), consistent w/ H4

"Holdings illiquidity pos. corr. with Fdistance, consistent w/ H5"

6/ "Portfolio holdings disclosure appears to be the source of the positive early filing abnormal returns. This is consistent with our argument that timely disclosure helps arbitrageurs compete with activist investors by reducing the cost and risk of arbitraging fund discounts."

7/ "The returns of the L/S portfolio become statistically significant exactly when the implementation of the strategy is facilitated by the timely disclosure of portfolio holdings. This is consistent with managers strategically disclosing early to facilitate arbitrageurs."

8/ "The greater the information a manager has, the more likely the manager will choose to delay the holdings filings, as a protection from copycat threats.

"The manager may also delay disclosure to avoid front-running in cases of higher planned trading activity."

9/ "Early holdings disclosure acts as an alternative or supplement to other value enhancement actions, like managed distribution policies, as a defense against activist investors. This is despite the strong motives for late disclosure due to copycatting & front-running threats."

10/ Related research:

What Drives Closed-End Fund Discounts? Evidence from COVID-19 (Ma)

https://twitter.com/ReformedTrader/status/1371139740557185028

Exploiting Closed-End Fund Discounts: A Systematic Examination of Alphas

https://twitter.com/ReformedTrader/status/1354923117898960896