Few Bargains in Closed-End Funds

The month of January is known for a lot of things: New Year's resolutions, bad movies, sales on winter clothing. It's also the time of year when bargains on closed-end mutual funds become harder to find.

That was particularly true this year. Shares of closed-end funds tracked by Lipper finished the month at a median discount of 2.73% to net asset value. That represented a narrowing of 0.90 percentage points from the end of December and was the lowest level since February 2004.

Unlike open-end mutual funds, which continuously issue and redeem shares at their net asset value, closed-end funds issue a fixed number of shares that are traded throughout the day like stocks. When a closed-end fund's investment style falls out of favor, its share price can fall below the value of its holdings. Conversely, share prices of funds in a "hot" sector are often bid up to a premium over net asset value. ...