ARB - GDL: Forget The Discount To NAV This Fund Has Not Delivered

2024-06-27 14:11:55 ET

Summary

• GDL Fund is an equity merger arbitrage CEF with a large discount to NAV, underperforming and failing to beat simple money market investments.
• Merger arbitrage involves betting on binary outcomes in announced mergers, subject to regulatory approvals, with GDL showing a disappointing performance.
• The widening discount to NAV is justified by the fund's poor performance and high risk-free rates, unlikely to narrow without significant changes or improved results.
• The entire merger arbitrage sector seems to have fared very poorly in the past years, questioning allocations to this niche sector.

Thesis

The GDL Fund ( GDL ) is an equity merger arbitrage CEF which we covered a year and a half ago. The name comes from the Gabelli suite. In our original article we outlined what the fund does, its structure and market positioning. We are revisiting the name now, given its very large discount to NAV....

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