Feb. 19 (Bloomberg) -- The Herzfeld Caribbean Basin Fund, which aims to profit from the resumption of U.S. trade with Cuba, surged the most in its 13-year history after Fidel Castro resigned as the country's president and commander-in-chief.

Castro's decision is ``a clear step towards the possibility of the U.S. resuming trade with Cuba,'' Miami-based investor Thomas J. Herzfeld said during a telephone interview. He created the fund, whose ticker symbol is CUBA, in 1994.

The $30 million exchange-traded mutual fund owns shares of Shawnee Mission, Kansas-based hog producer Seaboard Corp. and Jacksonville, Florida-based shipper Trailer Bridge Inc., which also gained on speculation trade with Cuba will boost profit.

Herzfeld Caribbean Basin Fund surged $1.26, or 17 percent, to $8.70. A record 1.44 million shares changed hands. Earlier, the fund jumped 28 percent, the most ever.

The fund advanced 20 percent on Jan. 16, 2007, after Spanish newspaper El Pais reported that Castro, the communist leader of Cuba since 1959, was in serious condition following three surgeries on his large intestine.

Seaboard, which also transports about 3 million tons of grain annually on cargo ships, rose $53, or 3.4 percent, to $1,588 in American Stock Exchange composite trading.

Trailer Bridge, a provider of cargo transportation between the U.S. mainland and Puerto Rico, added 52 cents, or 4.9 percent, to $11.22 on the Nasdaq Stock Market.

Carnival Rises

Other companies that the Herzfeld fund owned on June 30, the most recent data available, advanced. Carnival Corp., the largest cruise-ship operator, rose 53 cents, or 1.3 percent, to $41.88. Consolidated Water Co., a Cayman Islands-based operator of drinking-water plants, rose 52 cents, or 2.3 percent, to $22.93.

The fund's largest holding on June 30, Florida East Coast Industries Inc., was purchased in July by Fortress Investment Group LLC. Fortress, a manager of private equity and hedge funds, paid $84 a share, a 13 percent premium, for the real estate developer and railroad operator.

The Herzfeld fund is the only U.S. closed-end fund focused on the Caribbean, according to the Web site of the Closed-End Fund Association. As of June 30, it had 54 percent of its assets in U.S. companies, 21 percent in Mexican companies and 8.4 percent in the Cayman Islands.

Net Asset Value

Closed-end mutual funds trade on exchanges at prices that may differ from the per-share value of their assets. Herzfeld Caribbean Basin Fund's closing price of $7.44 on Feb. 15 was a 7.5 percent discount to its so-called net asset value of $8.04.

Today's gain probably pushed the share price to a 7 percent premium to net asset value, said Eric Harper, who oversees about $900 million in closed-end fund shares for institutional clients at Wachovia Corp.'s Tattersall Advisory Group in Richmond, Virginia.

Tattersall hasn't invested in the fund, which Harper said has tended to trade at premiums because of its small size and unique objective.

``This is a small step in what's going to be a long cycle of opening up trade with Cuba,'' Harper said. ``It may be premature to believe that Cuba's open for business.''

Herzfeld said he bought shares in the past year of Lennar Corp., a Miami-based homebuilder, and other companies ``that may not necessarily be doing well now, but which are stronger Cuba plays'' than its core holdings.

Homebuilding in Cuba?

Lennar, whose shares have tumbled more than 70 percent since their July 2005 peak amid the U.S. housing recession, is ``well positioned to develop homes in Cuba down the road,'' Herzfeld said. Lennar lost 30 cents, or 1.6 percent, to $18.29 today.

Other recent additions include Copa Holdings SA, a Panamanian airline serving the region, and MasTec Inc., a Coral Gables, Florida-based installer of DirecTV Group Inc. systems and other networks.

MasTec's former chairman, the late Jorge Mas Canosa, founded the Cuban American National Foundation that sought Castro's overthrow. His son, Jorge Mas Santos, is the current chairman of both MasTec and CANF.

Herzfeld, a native New Yorker who turned 63 today, graduated from Philadelphia College of Textiles and Science, which was later renamed Philadelphia University, as a textile engineer in 1962. He began specializing in closed-end funds in 1968, Herzfeld said.

Founded in 1984

He founded Thomas J. Herzfeld Advisors Inc. in 1984 to invest in closed-end funds for clients. He oversees about $100 million, including the Caribbean Basin Fund, which is the only fund he manages. His clients have a minimum of $2 million to invest.

The fund's average annual return over the past 10 years is 7.3 percent, based on its share price, according to the Closed- End Fund Association. That compares with about 14.8 percent a year for the MSCI Emerging Market Latin America Index.

Shares of the fund began trading on May 20, 1994, which Herzfeld selected to commemorate the 92nd anniversary of Cuban independence from Spain. He set the initial public offering price at $5.20 for the same reason.

Herzfeld said he doesn't solicit new business and runs his firm out of an unmarked office building to avoid attracting attention.

``Miami is a very politically charged when it comes to Cuba,'' he said. ``We don't want people marching in the streets in front of our office, even if it's favorable.''

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Last Updated: February 19, 2008 16:16 EST