Under the Radar: Why Income Investors Are Loading Up on These Mispriced Assets

Let me tell you a little secret the Wall Street crowd would rather you not know. You can still buy a dollar at a discount in this market.

I'm not talking about some speculative biotech name or the latest AI flavor of the month.

I'm talking about closed-end funds—yes, those sleepy little investment vehicles that most of the market has forgotten about but that savvy deep value and income investors have been quietly exploiting for over a century.

Closed-end funds (CEFs) are the bastard children of the asset management world. They don't get the flashy headlines like ETFs or the breathless fund flows coverage in Barron's. They're not designed to make the mutual fund industry rich, nor are they set up to cater to high-frequency traders.

But for those of us who know where to look, they are a fertile hunting ground for mispricing, yield, and opportunity.

The core idea is simple: CEFs trade on exchanges like stocks, and they often trade at a discount to the value of the assets they hold. That discount exists because there's no mechanism for arbitrage like in an ETF.

You can't redeem shares at NAV.

There's no magical market maker stepping in.

If the crowd is pessimistic, or bored, or just not paying attention, these funds drift lower while the net asset value stays put. That, my friends, is where the opportunity lies.

Here's the kicker.

Those discounts aren't always justified.

Sure, some funds deserve to trade cheap.

Maybe the manager is a clown, or the holdings are garbage, or the fees are outrageous. But a lot of the time, it's pure sentiment.

A little retail neglect, a little sector rotation, and suddenly you can pick up a portfolio of quality muni bonds or dividend stocks for 85 cents on the dollar.

The whole time you're collecting yield based on the NAV, not the market price.

Let's not kid ourselves: this game isn't about hoping the market rediscovers value on its own.

It usually happens, but while I am patient if I can hurry things along, I am all  for it.

This is where the Activists come in. I

Investors  like Phil Goldstein at Bulldog Investors and Boaz Weinstein at Saba Capital.

These folks don't sit around waiting. They buy big chunks of these discounted funds, then go to war with the board of directors. Tender offers, liquidations, open-ending—whatever it takes to unlock that NAV and collect the payoff.

Goldstein, the godfather of CEF activism, has been doing this since the ’90s. The Swiss Helvetia Fund was his latest trophy. That fund was trading 20% below NAV until Bulldog muscled in, took control, and announced a special distribution equal to 30% of NAV.

That's not some academic theory—that's cash in hand.

Meanwhile, Saba is the new king of the hill. Weinstein’s been launching activist campaigns like clockwork, going after everything from BlackRock's innovation fund BIGZ to ASA Gold and Precious Metals ASA

The BlackRock deals were masterpieces. Saba forced them into tendering a large percentage of two funds almost full NAV.

That's the kind of trade where you clip a double-digit yield while you wait and then bank a 10% capital gain when the fund caves.

ASA? That fight is still going on, but Saba already got board seats and is pushing for a conversion.

That discount is living on borrowed time.

Let me be clear: this is not a strategy for index huggers or closet beta chasers.

You need to be willing to dig through the filings, read the 13Ds, and understand the governance.

But if you do the work—or if you just follow those of us who do—you can consistently buy assets below value and get paid handsomely to wait for the market to catch up or the activists to blow it up.

Even without a catalyst, many of these funds pay you to wait. Take Adams Diversified Equity ADX. It's been around for over a hundred years and trades at an 11% discount while yielding about 9% to market price. That yield is based on NAV, so when you buy at a discount, your effective yield goes up.

That's the magic of this approach: the income stream is richer, and the upside is real.

Right now, the opportunity set is wide open.

Muni bond funds? Double-digit discounts with tax-free yields in the 5% range.

High-yield funds? Trading cheap with activists circling.

Equity CEFs in sectors like healthcare, innovation, and energy? All battered, all yielding fat, and all likely to see narrowing discounts as sentiment improves or activists move in.

You don't have to reinvent the wheel. Just follow the trail left by the pros.

Watch the 13Ds, watch the discounts, and collect the checks. If you're an income investor with a contrarian streak, this is your playground.

In addition to ASA Saba has been buying BNY Mellon Strategic Muni Bond DSM and  NYLI CBRE Global Infrastructure Megatrends Term Fund MEGI recently.

Bulldog has been on attack buying shares of Alliance Bernstein National Muni Income AFB and New Germany Fund GF.

So yes, you can still buy a dollar on sale. Just don't expect Wall Street to advertise it. That's fine. Let them chase AI unicorns.

We'll be over here clipping yields, collecting special distributions, and watching our NAV discounts vanish one shareholder meeting at a time.