Comment by: Anonymous. Posted 14 years ago [2009-09-02 14:10:33]

KCAP's CLO marks have been materially different from dealer quotes and where other closed end funds mark their CLO investments. Eaton Vance's EVF has some BB CLO paper which they marked down to their ankles. Some may say investing in CLO BB paper doesn't follow the mandate of a "loan fund" and depicts a lack of discipline and care for shareholders, but at least the fund manager marked down its positions to reflect reality. These funds have a daily NAV, and trade publicly where the NAV is probably the most important valuation metric, so a material error in a mark distorts the NAV and shareholders' judgement. In KCAP's fund, it materially inflates the NAV, which also inflates the management fee so shareholders get gouged there also. So of course Bank of Montreal's view of collateral value of KCAP is different than Katonah's (the mgr of KCAP) - the market is also different, as depicted by the stock's large discount to its NAV. And CLO paper is just one example - Custom Direct 2nd lien: Katonah marks it at 92, the agent quotes it 55-60. The agent quotes the first lien 75-80. Mushrooms on Madison Avenue?