Bargains Rare in Closed-End Funds

In April, 51% of all closed-end funds had their individual discounts narrow, premiums increase, or discounts turn into premiums; but the trend was more marked in fixed-income funds, with 60%, than equity funds, with 35%.

Roseen says there are only a few "particular privileges" that justify buying a fund at a premium. Those include if the fund is the only way to invest with a star portfolio manager, or if investors want to buy leveraged assets, something that can't necessarily be accomplished with mutual funds.

Today's landscape is dissimilar to March 2004, the last time the median discount rate was this narrow. Back then, according to Roseen, investors were still "shell-shocked" by the market crash of 2000 and many didn't participate in the rally. Investment flows were very low, with many investors exiting the market despite outstanding returns.

The median discount of closed-end funds narrowed by 3.69 percentage points in the 12-month period ending April 30, 2007.