Miton's Scott says buys cheap closed-end funds

By Laurence Fletcher

LONDON (Reuters) - Miton Asset Management fund manager Richard Scott told Reuters he has been buying closed-end funds in the small-cap and technology sectors in recent days because share prices more than discount current economic woes.

"I've been very much taking money out of open-ended funds and moving into closed-ended funds because of the discounts," Scott, who manages the 69 million-pound CF iimia Growth & Income fund, said in an interview on Wednesday.

"OK, the economy is bad, but so much is discounted in these prices. You have to have a strong stomach ... The way the market has reacted, the baby has been thrown out with the bathwater."

Whereas open-ended funds trade at net asset value, the share prices of listed closed-end funds can move to discounts or premiums to net asset value, depending on investor sentiment.

As investor worries over the credit crisis and a possible U.S. recession have grown in the second half of last year and into 2008, discounts on closed-end funds have widened. They now stand at a 12-month high of 12 percent, compared with their average 7 percent over the past year.

Scott, who is the brother of F&C Asset Management (FCAM.L) star fund manager Ted Scott, said he bought shares in Dunedin Smaller Companies (DNDL.L) investment trust on Wednesday on a 20 percent discount to net asset value and prospective yield of more than 4 percent.

He also picked up shares in Polar Capital Technology (PCT.L) trust at close to a 20 percent discount and Aberdeen Asian Income (AAIF.L) at around a 10 percent discount in recent days.

Scott also said he likes funds offering high yields, including JZ Equity Partners JZE.L, which invests in small-cap U.S. management buyouts and whose ordinary shares offer a prospective yield of around 11 percent, and the open-ended Artemis Strategic Bond fund, run by James Foster and Alex Ralph.