Closed-End Fund Discounts
Closed-End Funds (CEFs) tend to trade at market prices that are discounted (less than) the net asset value of the shares. In some cases, a portion of these discounts reflects underpricing due to market inefficiencies. In these rare circumstances, investors may be able to earn superior risk-adjusted returns relative to other investment opportunities. However, in most cases the discounts reflect unattractiveness of the closed end fund due to factors such as high expense ratios, over-stated book values of illiquid assets, poor management teams, or unfavorable taxation.