A clever niche opportunity among mutual funds

29 November 2019

Mutual funds cannot legally keep hidden reserves. However, based on the current state of facts, this particular European equity fund is holding an investment that is virtually the equivalent of a hidden reserve. I call it "hidden potential".

Speaking figuratively, you can view this constellation either as buying a mutual fund with a discount, or as buying the indirect stake in this particular portfolio company for the prevailing price of October 2018 (that's not a typo).

The net result is the same. There is a very clever bargain to be had.

Sometime during 2020 and quite possibly as early as the next months, the fund could see a sudden increase in net asset value. This is likely going to be the case even if the rest of the fund's portfolio doesn't change in price at all.

I ran my findings past two colleagues to ask them if I should publish this as part of my free Weekly Dispatches. Their feedback was clear: "This is such a good opportunity that we need to limit this report to our website's paying Members! The information is literally worth money and should not go into the public domain."

Any EU resident can purchase this mutual fund, and it can probably also be bought by almost anyone who lives outside of the EU. Merely in the case of US-Americans there is a question mark if they can invest – probably yes, but I cannot guarantee it. The fund is available with a minimum investment of just EUR 100.

Without revealing anything else, I view this as an opportunity that is ideally suited for more conservative investors. It won't double in value overnight, but there is a nice gain to be made next year.

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