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“willing buyer” of a transferred interest would account for such
lack of control by demanding a reduced sales price; i.e., a price
that is less than the interest’s pro rata share of the
partnership’s NAV.
2. Comparison to Closed End Investment Funds
a. Overview
Each expert witness determined a minority interest discount
for the transferred interests by reference to shares of publicly
traded, closed end investment funds, which typically trade at a
discount relative to their share of fund NAV.10 The idea is
that, since such shares (by definition) enjoy a high degree of
marketability, those discounts must be attributable, at least to
some extent, to a minority shareholder’s lack of control over the
investment fund.11
10 We understand from the expert reports received into
evidence in this case that, unlike a shareholder of an open-end
fund (and similar to a holder of a limited partner interest in
the partnership), a shareholder of a closed end fund cannot
obtain the liquidation value of his investment (i.e., his pro
rata share of the fund’s NAV) at will by tendering his shares to
the fund for repurchase.
11 That there are other factors involved in the pricing of
closed end fund shares is evidenced by the fact that shares of
some funds trade at a premium relative to their share of fund
NAV. In his written report, Mr. Burns suggests that positive
pricing factors include heightened investor interest in the
specific attributes of a fund, while additional negative pricing
factors (i.e., in addition to lack of control) include fund
management fees and administration fees. Absent any further
refinement of the data contained in the record, we assume that,
within each sample of closed end funds we consider in our
analysis, such positive factors and additional negative factors
(continued...)
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