RE: Great deal for Management. Whats in this for sYou're right, management has done very well for themselves here and I can't imagine why anyone would buy one of these funds at IPO. After underwriting fees the initial NAV is 6 - 7% lower than IPO price on day 1 and then most closed-end funds usually trade at a discount to NAV shortly thereafter.
However I believe there are still a few good reasons to own this now:
1. The reason management took home a fat incentive fee was for growing NAV dramatically and significantly outperforming relevant benchmarks (NAV grew about 50% during 2008 - 09 when equitites, including gold stocks, did quite poorly)
2. No doubt some of this success can be attributed to one of the advantages of the closed-end fund model, that during the panic selling of 2008, while mutual funds were busy selling positions at fire sale prices in order to meet redemptions, this fund was able to hold their captive asset base and take advantage of some of the rock bottom prices.
3. Of course none of this matters if you can never sell the units for more than you paid, but there is a point when the discount becomes too attractive to ignore. Eventually there will be a catalyst to close the gap. This could be something dramatic like the winding down of the fund or conversion to a mutual fund or just the gradual realization that there is good value in paying $10 for $17 worth of assets.
The only reasonable explanation for the current 40% discount is that the market believes $12 warrants will likely be exercised at year-end, which will double the number of units and dilute the NAV. Assuming no other change in market value of portfolio, that would mean the price moves up to $12 and the NAV down to about $14.50 leaving a discount of about 17%. The way I look at it, that still represents a pretty good return at current prices. Also even 17% seems too large a discount for a fund that's had the kind of success that this one has.