NEW YORK -- Morgan Stanley Dean Witter Discover & Co. introduced a new research service that will track performance of 28 closed-end country funds.
Paul Mazzilli was named director of country fund research within the company's equity research division and will head the effort. Mr. Mazzilli is a 20-year veteran of Morgan Stanley and most was recently an investment banker in the equity capital markets division, where he managed more than 30 international closed-end fund initial public offerings.
Mr. Mazzilli works with more than 200 in-house strategists, economists and global industry analysts in conducting research into country- specific closed-end funds.
The initial universe of 28 funds was selected to represent the largest and most widely held funds, with wide coverage of world markets. Mr. Mazzilli's team isn't currently researching country funds in markets that lack significant opportunity for investors.
Closed-end funds are trading at an historically wide discount of about 13% to the underlying net asset value of the portfolios, compared to the average discount since 1985 of 2%, Mr. Mazzilli said in his initial research report.
Mr. Mazzilli's "strong buy" list includes the Brazil Fund, managed by Edmund P. Games Jr. at Scudder Kemper Investments Inc.; the Latin America Discovery Fund, managed by Robert Meyer at Morgan Stanley Asset Management; the Mexico Fund, managed by Jose Luis Gomez Pimienta at Impulsora del Fondo Mexico S.A. de C.V.; the Morgan Stanley India Investment Fund, managed by Vinod Sethi; and the India Fund, managed by Punita Kumar-Sinha at Advantage Advisers Inc.
Morgan Stanley Dean Witter's closed-end fund research will knock heads with existing research services, such as the Lipper International Closed-end Funds Service, published by Lipper Analytical Services Inc., New York.
The 350 portfolios tracked by Lipper were sharply hit by losses in world markets in October, with an average registered loss in net asset value of 11.57%. The 306 funds reporting a market price in October showed an average market decline of 12.9% for the month.
Closed-end funds investing in emerging markets had average losses of 14.7% in net asset value, compared to an average 5.6% loss in developed country funds.
The performance of developed market closed-end funds has stayed barely positive year to date through Oct. 31, with average returns of 2.3% in net asset value and 0.8% in share price. Emerging markets portfolios averaged a -6.2% return on NAV and a -7.4% return on share price year to date through Oct. 31. The top-performing equity closed-end fund was the Singer & Friedlander AIM Fund, with a 5.7% return for the month. The fund invests in developed European markets.
The best-performing Asian fund was the Regent Central Asia Fund with a 4.8% return for the month for NAV, according to Lipper.
Fixed-income closed-end funds fared better than equity funds through Oct. 31, with average returns of 4.3% on NAV and 8.7% on share price, according to Lipper. Bond funds faltered in October, however: only four of 35 funds tracked managed to turn in positive returns on NAV, with an average return of -7.4% for October.