Many of the closed-end funds that have had a tough time over the last 12 months came roaring back in the first quarter. Closed-end funds are portfolios of securities bought and sold like stocks throughout the trading day.

They differ from exchange-traded funds in that closed-end funds don't continuously issue and redeem shares. So, closed-end funds are subject to supply and demand pressures. As investors buy up the limited number of shares being offered for sale, these funds can trade at prices above their net asset value (NAV).

The excess in price over NAV is the premium percentage. High or rising premium percentages reveal securities in demand but also represent the risk of price decline even as the underlying securities hold their value or rise modestly.

Funds trading at prices below NAV are said to be selling at a discount. This is not the case for any of the top ten closed-end performers.

For the first quarter of 2008, the best performing closed-end fund is the C- rated Cornerstone Strategic Value Fund ( CLM). This fund returned 21.10% in the three months ending March 31. At 52.2% above NAV, the fund has been bid up to the largest premium of the top ten. One reason for the huge premium may be the monthly income being paid out at an indicated dividend yield of 17.85%.

Holdings contributing to the positive performance of the Cornerstone Strategic Value Fund include quarterly gains of 27.86% from CSX ( CSX), 24.38% from Yahoo! ( YHOO), 20.68% from XTO Energy ( XTO), and 17.76% from BJ Services ( BJS).

In second place, gaining 18.44% for the quarter is the C-rated Cohen & Steers Total Return Realty Fund ( RFI).

At quarter-end, this fund was paying a dividend yield of 8.85% and trading at a modest premium of 10.4%. REIT holdings account for 97% of assets. Firstquarter returns of 25.65% in UDR ( UDR), 18.30% in Mid-America Apartment Communities ( MAA), 16.51% in Cedar Shopping Centers ( CDR) and 15.12% in Extra Space Storage were the best of the lot.

Third place belongs to Cornerstone Total Return Fund ( CRF) returning 17.09% in the first quarter. This fund is rated E+ due to its volatile price history. The fund's quarter-end dividend yield of 17.79% is high, but so is its 51.9% premium. The largest holdings include Exxon Mobil ( XOM), General Electric ( GE), Citigroup ( C), AT&T ( T), and Microsoft ( MSFT).

Ten Best Performing Closed-End Funds

Ranked by first quarter returns

Fund (Ticker) Rating Total Return 3 Month Total Return 1 YR 3/31/08 Premium Objective
Cornerstone Strategic Value Fund (CLM) C- 21.10% -20.21% 52.20% Equity Income
Cohen & Steers Total Return Realty (RFI) C- 18.44% -4.21% 10.40% Growth & Income
Cornerstone Total Return Fund (CRF) E+ 17.09% -30.92% 51.90% Equity Income
Central Fund of Canada (CEF) A 16.37% 33.96% 5.00% Sector - Precious Metals
Templeton Global Income Fund, Inc (GIM) B+ 14.94% 11.30% 2.10% Global Income
PIMCO Corporate Income Fund (PCN) B- 13.62% -4.35% 13.80% Corporate - High Yield
PIMCO Municipal Income Fund (PMF) A 13.34% -2.44% 27.50% Municipal - National
First Trust Strategic High Income Fund III (FHO) U 13.21% -36.97% 18.50% Global Income
Cohen & Steers Quality Income Realty Fund (RQI) E+ 12.06% -19.96% 2.00% Growth & Income
BlackRock Investment Quality Municipal Trust (BKN) B+ 11.60% -10.15% 19.00% Municipal - National

Source: Ratings. For an explanation of our ratings, click here.
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.