The average closed-end fund discount to net asset value is now 9% -- double the 15-year average. That's creating a great buying opportunity for yield-seeking investors, said Christian Magoon, CEO of Magoon Capital.

"Certainly it's a bit of a contrarian play. It's fear about the Fed raising rates, that's what it boils down to," said Magoon, adding that investors are concerned about the leverage used in many fixed-income closed-end funds.

Closed-end funds are baskets of stocks compiled according to an investment objective and overseen by a manager. But unlike open-end funds, which can continue to increase their asset base by selling to new shareholders, closed-end funds bring in assets by selling a fixed number of shares through an initial offering. After the initial sale, the closed-end fund's shares trade like stocks on exchanges like the NYSE or the Nasdaq. Low demand for a fund can cause closed-end shares to trade at discounts to net asset value, while high demand can cause them to trade at a premium.

TheStreet Recommends

High closed-end fund discounts provide the potential for above-average income, as assets can be purchased for about 91 cents on the dollar today. High closed-end fund discounts relative to long term averages present an opportunity for capital appreciation should discounts revert to the mean.

Magoon's YieldShares High Income ETF (YYY) - Get Report is an index tracking ETF that owns the top 30 closed-end funds based on three categories: discount to NAV, income and liquidity.  The YieldShares High Income ETF is down more than 11% so far this year. It sports a trailing 12 month yield of 11% and the average discount in the fund is around 12%.

One third of the assets in the ETF are covered-call equity closed-end funds, and the rest are debt closed-end funds ranging from senior loan to high yield to investment grade.

If interest rates fail to rise, Magoon said his fund will likely stay flat, but investors will continue to enjoy above-average market income "while they are waiting for those discounts to compact back to historical levels."