prices in a few years’ time; at the end of 1970 one sold at only one-
quarter of its high, another at a third, another at less than half. If we
consider the three domestic companies selling above asset value,
we find that the average of their ten-year overall returns was some-
what better than that of ten discount funds, but the opposite was
true in the last five years. A comparison of the 1961–1970 record of
Lehman Corp. and of General American Investors, two of our old-
est and largest closed-end companies, is given in Table 9-5. One of
these sold 14% above and the other 7.6% below its net-asset value
at the end of 1970. The difference in price to net-asset relationships
did not appear warranted by these figures.Investment in Balanced Funds
The 23 balanced funds covered in the Wiesenberger Report had
between 25% and 59% of their assets in preferred stocks and bonds,
the average being just 40%. The balance was held in common
stocks. It would appear more logical for the typical investor to
make his bond-type investments directly, rather than to have them
form part of a mutual-fund commitment. The average income
return shown by these balanced funds in 1970 was only 3.9% per
annum on asset value, or say 3.6% on the offering price. The better
choice for the bond component would be the purchase of United
States savings bonds, or corporate bonds rated A or better, or tax-
free bonds, for the investor’s bond portfolio.
Investing in Investment Funds 241TABLE 9-5 Comparison of Two Leading Closed-End
Companiesa
Premium or
Discount,
5 years, 10 years, December
1970 1966–1970 1961–1970 1970General Am.
Investors Co. –0.3% +34.0% +165.6% 7.6% discount
Lehman Corp. –7.2 +20.6 +108.0 13.9% premium
aData from Wiesenberger Financial Services.