Thats not a small fee and definitely something to bear in mind. However, from the Annual Report itself:
The problem with this approach is that investors can only replicate changes in our portfolio when we disclose them. By the date on which we are required or choose to disclose a new position, its trading price is typically well above PSH’s average cost of acquisition. As a result, investors who attempt to track and replicate the portfolio will likely have a substantially higher cost basis in our investments, and therefore will earn lower returns.
More significantly, there are limited disclosure requirements for the various hedging transactions we have historically executed. For example, had PSH Replicators simply purchased and held PSH’s portfolio as of the beginning of last year until the end of the year and paid no fees, they would have realized a 15.4% return.10 Had they purchased PSH shares instead, they would have earned a 70.2% NAV total return and an 84.8% TSR as the opportunity to realize returns from the credit hedge and reinvest the proceeds in our existing holdings would not have been in the PSH Replicator’s portfolio.
Net of fees, long-term PSH investors have earned substantially superior returns than that of the theoretical PSH Replicator. For the above reasons, we believe that PSH is an attractive acquisition at its NAV, and an even better investment when it is trading at a discount to NAV.
@NeilB For tax reasons according to this interview.
I have to say though it is probably the simplest, and possibly most valuable way to play the PSTH-UMG deal, given most brokers will have issues or delayed communication regarding what people are actually entitled to. I’ve not bought more PSTH for that exact reason but am considering buying PSH. As always though this fund is only worth it if you truly believe in BA’s execution. If not there’s really no point.