Allocating capital with a margin-of-safety approach is something we have been focused on, particularly as market valuations have grown richer over the last few months. The Western Asset Global High Income Fund (EHI) offered this in spades with its generous tender offer. However, when we first highlighted the fund its discount was around 4.5% which offered a high single-digit breakeven on the residual shares (meaning that investors participating in the tender offer could see a drop of nearly 10% on the shares not accepted into the tender before they lost money on the entire deal). Now that the fund’s discount is just 1.8%, the breakeven has been reduced to less than 3% which feels a bit rich for our blood.
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