One of my favorite quotes about closed-end funds (CEFs) comes from Richard Thaler. When writing about why investors bought some CEFs for more than they’re worth, he simply said: “There are idiots,” and that this was “the only satisfactory answer to this … puzzle.”
That, er, very direct, quote comes to mind now because these days, it’s actually pretty easy to pick up CEFs (which yield around 7%, on average) trading at nice discounts to net asset value (NAV, or the value of their underlying holdings). There are literally hundreds of examples, some of them extreme.
The most discounted equity CEF trades at a whopping 26.7% discount as I write this.… Read more