Closed-End Funds Slump Amid ETF Surge

Is the "chain reaction" in ETFs behind the recent explosion in closed-end fund discounts?

Out of all the traders spooked by October's market mayhem, those that deal in closed-end funds, or CEFs, may have felt their pulses quicken the most. According to Lipper, the median discount for all CEFs plummeted 42% from 4.8% at the start of the month to a six-month low of 6.8% on Oct. 21.

CEFs typically trade in relation to, but independent of, their underlying net asset values, or NAVs. That means that unlike open-end mutual funds, shares of closed-end funds can trade at premiums or discounts to their underlying NAVs, a feature many traders find attractive. ...