ETFs With the Biggest Premiums, Discounts

Of course, even these outliers trade at discounts or premiums to NAV far lower than that of the average closed-end fund. While the share prices of the non-U.S. equity ETFs in this list diverged from their NAV by an average of less than 1% over the 13 weeks ended Oct. 27, the price of the average non-U.S. equity closed-end fund diverged from its NAV by 7.24% over the same period.

Closed-end funds are far more prone to trade above or below the value of their periods of time. It is because they issue a fixed number of shares and there is no mechanism in place that allows traders to profit from the discrepancy between fund share prices and the prices of the underlying stocks.

[By comparison, open-end mutual funds, which are not traded on an exchange, issue an unlimited number of shares and redeem them upon request at their net asset value.]

It's not unusual for sponsors to launch a closed-end fund when a particular sector or asset class is hot, only to see its share price drop below NAV and languish there once the investment falls back out of favor.

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