Monday, May 15, 2006

The NAV Premium For The Templeton Russia Fund (TRF) is Plummeting!

The Templeton Russia and Eastern Europe closed-end fund (symbol: TRF) has dropped like a rock over the past week. TRF has dropped from a closing price of $93.81 on May 9th to a closing price of $72.50 as of today, May 15th. That is a drop of 22.7% in just four days of trading. Meanwhile, the Russia stock market benchmark RTX index has dropped around 9% over the same time period.

The reason why TRF has fallen so much more than the RTX index is because its closed-end fund premium was very high as of last week. According to ETFconnect, TRF was trading at a premium of about 37% above its net asset value (NAV) on May 9th, and that premium has dropped all the way down to about 9% as of today, May 15th.

Most closed-end funds trade at discounts to their underlying NAV. However, some of the best performers do occassionally trade at large premiums. Unfortunately, these premiums can quickly evaporate when the going gets tough and momentum investors start to jump ship.

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