Closed-End Funds Offer the Best Bargains

An example right now: the $394 million Clough Global Equity Fund(GLQ Quote), run by Chuck Clough. He was a Merrill Lynch strategist until a few years ago, when he left to start his own shop. He runs private-money and hedge funds as well as three closed-end funds for ordinary investors.

Clough Global Equity invests in stocks worldwide. It gives Clough the freedom to put the money where he sees the best opportunities, and to avoid what he thinks are needless risks. It has done well since it was launched in April 2005. The underlying investments had turned a 32% profit through the end of 2006, compared with around 27% for the S&P 500 index. That's even after paying steep management fees of 2.5% of the assets per year.

Clough Global Equity's investment record looks less good to casual observers because when it was launched, the shares were priced at about 5% above the value of the underlying holdings. That's where the salesmen, at companies such as Merrill Lynch(MER Quote), make their cut.

On Friday, though, Clough Global Equity shares had slumped to 9.5% below net asset value. That was based on Thursday's close.

That discount, which had been widening since the start of the year, yawned significantly this week during the turmoil. You're now paying less than 91 cents for each dollar of investment. The forecast dividend yield is a wonderful 6.6%.