Bargains in closed-end funds kept piling up in October as they traded at discounts to net asset values not seen in nearly seven years.

The median discount on closed-end funds tracked by Lipper widened by 169 basis points to 8.73% at the end of the month from 7.04% in September. That discount was the largest since December 2000.

"Market volatility is up and people are concerned about where the economy is going," says Tom Roseen, a senior research analyst at Lipper.

These funds are still traded primarily by savvy individual investors, Roseen says, and "they're becoming a little more hesitant and not quite as enthusiastic as we saw, say, in May," when the median discount had narrowed to 1.81%.

Unlike open-end funds, which are continuously offered, closed-end funds issue a fixed number of shares that are bought and sold on an exchange like stocks. They often trade below the value of their holdings.

By Oct. 31, only 61 funds in the closed-end universe were trading at a premium, down from a one-year peak of 240 on May 31.

Just 18% of all closed-end funds' discounts narrowed or premiums widened in October.

The big discounts on equity funds belied their strong performance. Even though investors weathered two days where the

Dow Jones Industrial Average

dropped more than 360 points, the average closed-end equity fund tracked by Lipper returned 3.41% for the month.

For the three-month period ended Oct. 31, equity closed-end funds had average net asset value returns of 7.76%.

Lipper says strong earnings reports from technology companies and the

Fed's

25-basis-point cut on Oct. 31 may have helped offset investor concerns, including the declining U.S. dollar, near-record prices for crude oil futures, more troubling numbers from the housing sector and a downgrade of

Citigroup

(C) - Get Report

that suggested there will be more fallout from the subprime lending fiasco.

International funds powered equity returns. World equity funds returned an average of 6.84%, exceeding the 2.51% growth of domestic equity funds.

Eighteen of the top 20 closed-end funds came from Lipper's world equity classification. India funds claimed the two top spots:

India Fund

(IFN) - Get Report

grew 17.98% and sold at a 5.76% discount on Oct. 31, while

Morgan Stanley India Investment Fund

(IIF) - Get Report

returned 15.38% and traded at an 8.55% discount at month's end.

"We saw really strong performance from the whole

world equity group," Roseen says. "If we look at China and India and those types of places, we're looking at growth" based largely on strong commodity production and demand.

A weaker U.S. dollar also bolstered world equity returns. In October, the dollar sunk 1.7% against the Euro and 1.9% against the pound, but gained 0.3% vs. the yen.

"The Europeans had a robust time period due to fairly good earnings, such as

Deutsche Bank

(DB) - Get Report

, but also due to the foreign currency

strength," Roseen says.

World fixed income funds returned 2.36% during the month, outperforming rises of 0.35% by domestic fixed income funds and 0.34% by general municipal bond funds.

Discounts on domestic bond funds widened 199 basis points during the month, reaching a median of 8.54% on Oct. 31. The biggest sellof was in high-yield bond funds -- described by Roseen as "kind of the sweetheart" in the middle of the year -- where discounts moved out 288 basis points to 10.13%.

"Bond funds were dealt a pretty rough hand this month," Roseen says.