Closed-End Fund with Hedging Portfolio

• US 20110047093A1
• Filed: 08/24/2009
• Published: 02/24/2011
• Est. Priority Date: 08/24/2009
• Status: Abandoned Application

• Current Assignee: Eaton Vance Management (International) Ltd. (Germany) (Morgan Stanley)
• Original Assignee: Eaton Vance Management (International) Ltd. (Germany) (Morgan Stanley)
• Inventors: Faust,, Thomas E. JR.
• Application Number:
  US12/545,953
• Publication Number:
  US 20110047093A1
• Time in Patent Office: Days
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis
• CPC Class Codes: G06Q 40/08 Insurance

Abstract

A computer implemented system and method for administering a closed-end-fund (CEF) includes configuring the CEF to have a plurality of units available for sale to the public, the units being configured for trading on one or more secondary markets, and the fund having a predetermined fund maturity date. A fund portfolio of assets are identified, which are liquidatable, substantially coincidentally with the fund maturity date, and that have a predetermined monetary value. The fund portfolio of assets is purchased and held within the fund. A hedge portfolio is identified, configured to substantially offset financial risk associated with the fund, and published.

Claims

1. A computer implemented method of administering a closed-end-fund (CEF), the method comprising:

(a) Configuring, electrically, the CEF to have a plurality of units available for sale to the public, the units being configured for trading on one or more secondary markets, and the fund having a predetermined fund maturity date;

(b) Identifying, electrically, a fund portfolio of assets being liquidatable, substantially coincidentally with the fund maturity date, and having a predetermined monetary value;

(c) Purchasing and holding within the fund the fund portfolio of assets;

(d) Identifying, electrically, a hedge portfolio configured to substantially offset financial risk associated with the fund; and

(e) Publishing, electrically, the hedge portfolio.

2. The method of claim 1, further comprising:

(f) Identifying, electrically, an underlying asset portfolio of assets having desired performance characteristics;

(g) Configuring, electrically, a plurality of derivatives having predetermined derivative maturity dates substantially coinciding with the fund maturity date, the derivatives linked to underlying assets, including the underlying asset portfolio, and in which the monetary value of the underlying assets of the derivatives represents a predetermined percentage of said predetermined monetary value; and

(h) Purchasing and holding within the fund the derivatives.

3. The method of claim 2, comprising publishing, electrically, the value of the hedge portfolio, the fund'"'"'s net asset value and fund expenses.

4. The method of claim 3, comprising publishing, electrically, the potential return an investor would have realized had the investor purchased the hedge portfolio along with the shares of the fund at a point in time.

5. The method of claim 2, wherein the fund portfolio of assets is configured to include cash-like instruments.

6. The method of claim 5, further comprising publishing, electrically, the configuration of the plurality of derivatives.

7. The method of claim 6, further comprising publishing, electrically, the identity of the fund portfolio.

8. The method of claim 7, further comprising effecting said publishing at predetermined intervals of:

at least once per day; and

up to and including once per month.

9. The method of claim 1, comprising configuring the fund portfolio of assets to be liquidatable within 90 days prior to the fund maturity date.

10. The method of claim 9, comprising configuring the fund portfolio of assets to be liquidatable within 30 days prior to the fund maturity date.

11. The method of claim 1, comprising configuring the maturity date to correspond to a holding period of at least one year from the date of said purchasing (f).

12. The method of claim 11, comprising configuring the maturity date to correspond to a holding period of up to five years from the date of said purchasing (f).

13. The method of claim 2, wherein said configuring (g) comprises configuring the plurality of derivatives to qualify for long term capital gain/loss under U.S. Federal income tax laws.

14. The method of claim 13, wherein said configuring (g) further comprises configuring the derivatives in the form of single contracts, including single over-the-counter (OTC) derivatives contracts having a counterparty.

15. The method of claim 13, wherein said identifying (b) comprises identifying assets configured to generate income that is less than or equal to the expenses of operating the CEF.

16. The method of claim 1, comprising liquidating the fund assets and the fund units substantially at the fund maturity date.

17. A computer-implemented system for administering a closed-end-fund (CEF), the system comprising:

a Closed-End Fund Module configured to, using a computer, define a CEF having a plurality of units available for sale to the public, the units being configured for trading on one or more secondary markets, and the fund having a predetermined fund maturity date;

a Fund Portfolio ID Module configured to, using a computer, identify a fund portfolio of assets being liquidatable substantially coincidentally with the fund maturity date, and having a predetermined monetary value;

a Transaction Module configured to, using a computer, direct the purchase and holding within the fund, the fund portfolio, and the derivatives;

a Hedge Portfolio Module configured to, using a computer, identify a hedge portfolio configured to substantially offset financial risk associated with the fund;

a Publication Module configured to, using a computer, publish the hedge portfolio.

18. The system of claim 17, wherein the Publication Module is configured to, using a computer, publish the value of the hedge portfolio, the fund'"'"'s net asset value and fund expenses.

19. The system of claim 18, wherein the Publication Module is configured to, using a computer, publish the potential return an investor would have realized had the investor purchased the hedge portfolio along with the shares of the fund at a point in time.

20. The system of claim 17, further comprising:

an Underlying Asset Portfolio ID Module configured to, using a computer, identify an underlying asset portfolio of assets having desired characteristics;

a Derivative Configurator Module configured to, using a computer, configure a plurality of derivatives having predetermined derivative maturity dates substantially coinciding with the fund maturity date, the derivatives including financial derivatives linked to underlying assets, including the underlying asset portfolio, and in which the monetary value of the underlying assets of the derivatives represents a predetermined percentage of said predetermined monetary value; and

wherein the Transaction Module is configured to purchase and hold within the fund the derivatives.

21. The system of claim 20, wherein the Fund Portfolio ID Module is configured to identify a fund portfolio of assets, including cash-like instruments.

22. The system of claim 20, wherein the Publication Module is configured to publish, electrically, the configuration of the plurality of derivatives.

23. The system of method of claim 22, wherein the Publication Module is configured to publish, electrically, the identity of the fund portfolio and the fund'"'"'s NAV.

24. The system of claim 23, wherein the Publication Module is configured to effect the publishing, electrically, at predetermined intervals of:

at least once per day; and

up to and including once per month.

25. The system of claim 17, wherein the Fund Portfolio ID Module is configured to identify a fund portfolio of assets which are liquidatable within 90 days prior to the fund maturity date.

26. The system of claim 25, wherein the Fund Portfolio ID Module is configured to identify a fund portfolio of assets which are liquidatable within 30 days prior to the fund maturity date.

27. The system of claim 17, wherein the Closed-End Fund Module is configured to configure the maturity date to correspond to a holding period of at least one year from the date said fund portfolio is purchased.

28. The system of claim 27, wherein the Closed-End Fund Module is configured to configure the maturity date to correspond to a holding period of up to five years from the date said fund portfolio is purchased.

29. The system of claim 20, wherein the Derivative Configurator Module is configured to configure the plurality of derivatives to qualify for long term capital gain/loss treatment under U.S. Federal income tax laws.

30. The system of claim 29, wherein the Derivative Configurator Module is configured to configure the derivatives in the form of single contracts, including single OTC derivatives contracts having a counterparty.

31. The system of claim 30, wherein said Fund Portfolio ID Module is configured to identify assets configured to generate income that is substantially equal to or less than expenses of operating the CEF.

32. The system of claim 31, comprising a Liquidation Module configured to liquidate the fund assets and the fund units substantially at the fund maturity date.

33. An article of manufacture for administering a closed-end-fund (CEF), said article of manufacture comprising a computer usable medium having an executable computer readable program code embodied therein, said computer readable program code configured for:

Configuring the CEF to have a plurality of units available for sale to the public, and to have a predetermined fund maturity date;

Identifying an underlying asset portfolio of assets having desired performance characteristics;

Identifying a fund portfolio of assets including cash-like instruments being liquidatable substantially coincidentally with the fund maturity date, and having a predetermined monetary value;

Configuring a plurality of derivatives having predetermined derivative maturity dates substantially coinciding with the fund maturity date, the derivatives including financial derivatives linked to underlying assets including the underlying asset portfolio, and in which the monetary value of the underlying assets of the derivatives represents a predetermined percentage of said predetermined monetary value;

Purchasing and holding within the fund the fund portfolio of assets;

Purchasing and holding within the fund the derivatives;

Identifying a hedge portfolio configured to substantially offset financial risk associated with the fund;

Publishing the hedge portfolio, the fund'"'"'s NAV, and fund expenses;

Publishing the value of the hedge portfolio;

Publishing the potential return an investor would have realized had the investor purchased the hedge portfolio along with the shares of the fund at a point in time, and

Configuring the units for trading on one or more secondary markets.