Brett Arends’s ROI: Market turmoil creates a historic sale in these mutual funds

by | Oct 31, 2023 | Stock Market

If you’re looking to snap up some investments at a bargain amid the recent market turmoil, check out closed-end funds. These regulated mutual funds, which trade on the stock market like a regular company stock, have just plunged to their biggest discounts to intrinsic value in years — and in some cases, decades.

“Closed-ends over the last few weeks have really widened out significantly,” says Gregory Near of Relative Value Partners, a wealth-management firm that invests frequently in these funds.  “If you look at discounts in general, they’re the widest they’ve been since the world financial crisis,” says Erik Herzfeld, president of veteran closed-end investment company Thomas J. Herzfeld Advisors of Miami Beach, Fla.  Data from Closed-End Fund Advisors, a specialized investment firm that tracks the industry, show that closed-end funds that invest in tax-free municipal bonds are now at their biggest average discounts in at least 25 years — including during the global financial crisis of 2007-09 and the COVID panic. Think of it as buying a mutual fund at 10% or 15% below the value of its investments. Closed-end funds often trade at small discounts of a few percentage points below net asset value — but rarely at dis …

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