How to buy a mini hedge fund on sale

Hedge funds were designed for the rich... or at least for the Harvard MBAs who wanted to get rich on 20% incentive fees. Now they rarely actually hedge very fully but the name seems to have stuck. Usually with a minimum purchase of 50-100K for accredited investors they are not very accessible to most people.

But many closed end funds are available for purchase by anyone on the open market, and some are run in similar ways. They have the resources and contacts to get in on various deals that are not available to most investors. The ones I am interested in are investing in higher risk junior resource companies, and they tend to trade at a discount to their NAV.

Some examples:

AAB-T Aberdeen International
LV-T Longview Capital
PNP-T Pinetree Capital
TRT-V TriNorth Capital

I own small amounts of 3 of these, but the one I like the most now is AAB. It closed today at 33 cents and at June 30th had an NAV of 1.02. And it is most likely 10% or more higher that that now. Why the deep discount? Well they all tend to trade like that, but this is deeper. It may be as maybe 30-40% of the NAV is tied up in the estimated NPR (net present value) of an NSR (net smelter royalty) on an Au and U238 (gold and uranium) mine in South Africa, whose owners S&J (Simmers and Jack) have a checkered past (and many more acronyms). They had lent them $10m and when they didn't pay during the credit crisis AAB sued them to convert it to a potentially much more valuable NSR and won. But it depends of course if the mine is developed and all goes well. Currently there is insider trading scandal and director resignations (at S&J not AAB).

But more than half is invested in junior publicly traded junior resource companies, many or most of which are purchased in financing deals with added warrants. They have a value than can be easily computed on a daily basis if one were so inclined. I am not.

Keep in mind that even at this discount there is risk. This traded down from $1 in 2007 to a low of 8 cents in the 2008 crash. So not exactly your grandma's mutual fund.

So if you are looking to buy into junior resource area, but want some diversity, good management with inside connections, easy and cheap entry and exit, and a nice fat discount to boot, then I think this a great vehicle to do so. Sometimes I wonder why I follow so many when I could just buy this...

Oh yeah, it's fun.