Herzfeld Caribbean Basin Fund Shifts Investment Strategy

News Americas, New York, NY, March 12, 2025: The Herzfeld Caribbean Basin Fund Inc. (NASDAQ: CUBA) has announced a significant shift in its investment strategy, moving away from its traditional focus on the Caribbean Basin, including Cuba, to concentrate on Collateralized Loan Obligations (CLOs). This decision comes in response to the enduring U.S. embargo against Cuba and the recent re-designation of Cuba as a state sponsor of terrorism by the Trump administration.

The move comes on the XXV Habanos Festival in Havana on February 28, 2025. (Photo by YAMIL LAGE/AFP via Getty Images)

Background and Rationale

The fund was originally established with the anticipation of capitalizing on investment opportunities that would arise from normalized U.S.-Cuba relations. However, the longstanding embargo and recent policy shifts have limited these prospects. In January 2025, the Trump administration reinstated Cuba’s designation as a state sponsor of terrorism, citing the country’s alleged support for international terrorism and harboring of fugitives.

This re-designation imposes additional economic sanctions on Cuba, further restricting the fund’s ability to invest in the region. In light of these developments, the fund’s Board of Directors has approved a transition to a CLO Equity Strategy, aiming to enhance shareholder value by focusing on assets less affected by geopolitical uncertainties.

Impact of U.S. Policy on Investment Strategy

The U.S. policy towards Cuba has significantly impacted the fund’s investment strategy. The re-designation of Cuba as a state sponsor of terrorism has led to increased economic sanctions, making it challenging for the fund to invest in the region. As a result, the fund has shifted its focus to CLOs, which are less affected by geopolitical uncertainties.

Rebranding and Future Outlook

As part of this strategic shift, the fund will undergo rebranding to reflect its new investment focus. Despite the pivot, the fund’s management remains attentive to future changes in U.S.-Cuba relations and retains the option to revisit its original investment objectives should the geopolitical landscape evolve favorably.

For more information on the fund’s new direction, visit herzfeld.com/cuba.

Conclusion

The Herzfeld Caribbean Basin Fund’s decision to shift its investment strategy is a response to the changing geopolitical landscape and the ongoing U.S. embargo against Cuba. The fund’s transition to a CLO Equity Strategy aims to enhance shareholder value and reduce exposure to geopolitical uncertainties. While the fund’s management remains open to revisiting its original investment objectives, the current focus on CLOs is expected to drive growth and stability in the short term.

Frequently Asked Questions (FAQs)

Q: What is the reason behind the Herzfeld Caribbean Basin Fund’s shift in investment strategy?

A: The fund has shifted its investment strategy due to the ongoing U.S. embargo against Cuba and the recent re-designation of Cuba as a state sponsor of terrorism, which has limited investment opportunities in the region.

Q: What is the fund’s new investment focus?

A: The fund will now focus on Collateralized Loan Obligations (CLOs), which are less affected by geopolitical uncertainties.

Q: Will the fund reconsider its original investment objectives in the future?

A: Yes, the fund’s management remains open to revisiting its original investment objectives should the geopolitical landscape evolve favorably.