Oct. 10, 2011, 12:00 a.m. EDT
How Wall Street scammed Mom and Pop — again
Commentary: Investors in this year’s fund IPOs should be protesting
By Brett Arends, MarketWatch
BOSTON (MarketWatch) — The question isn’t why some people are “occupying Wall Street” in protest right now.
It’s why so many others aren’t.
Among those missing? How about all those investors who got suckered by Wall Street this year in the disastrous initial public offerings of closed-end mutual funds. Their investments have been absolutely massacred by fees and poor performance.
Their total losses — hard to believe — total about $1 billion. Many of these investors are regular Moms and Pops.
Thomas Herzfeld, who’s been following closed-end funds for decades, says the losses are the worst he can ever remember.
Think of all those who got hustled by their brokers into the BlackRock Resources & Commodity Strategy Trust (NYSE:BCX) back in March. So far they’ve lost $260 million — nearly a third of their entire investment. In six months.
Or those who got conned into buying the ING Emerging Markets High Dividend Equity Fund (NYSE:IHD) in April. So far in just five months they’ve lost $143 million – or 36% of their stake.
Or what about those who were talked into the Brookfield Global Listed Infrastructure Income Fund (NYSE:INF) ? They only cut the checks at the end of August, and they already down 25%. In six weeks.
Don’t worry about the water cannon. These people already got hosed.
“These are the largest losses I’ve seen in new issues of closed-end funds I could ever remember,” says Herzfeld, chairman of Thomas J. Herzfeld Advisors.
In total, the Closed-End Fund Association lists 13 fund IPOs between January and August. The total raised was more than $5 billion. And so far investors have lost an average of 22% of their money.