The discount dynamic of closed-end funds adds an interesting second layer of potential alpha for fund investors. Just as investors look at valuations of underlying asset classes to guide their allocation decisions, they should and do consider the discount valuations of closed-end funds themselves. This second layer of valuations driven by movements in fund discounts creates a new set of opportunities for both tactical and strategic investors.
Just about anyone can point to a switch or a relative value trade that worked out for them. However, in order to build a consistent and ultimately successful