Closed-End Funds: Screening For Potential Opportunites To Kick Off Q1 2025

2025-01-13 15:59:32 ET

Summary

• The closed-end fund space saw a significant narrowing of discounts throughout 2024 as equity markets charged higher and now discounts remain tight heading into 2025.
• In particular, equity CEFs have seen significantly narrowed discounts along with taxable fixed-income, though municipal bond funds look relatively attractive after widening discounts in December.
• We are screening for funds with the deepest discounts and widest z-scores to find potential buys and funds that may be getting a bit pricey as sell candidates.
• We include a section for low or no-leverage funds with negative z-scores, which present potentially attractive opportunities, especially in uncertain markets moving forward.

Written by Nick Ackerman, co-produced by Stanford Chemist

We just came off of a strong 2024, but the market is always about looking forward to what new potential opportunities there might be. As we finished off near highs in the broader market, closed-end fund discounts remained relatively narrow overall. Though December was a bit of a struggle for the equity market indexes, there was some greater volatility that helped to shake up some funds to come to more attractive levels, too. That's why I thought it was due for another overall closed-end fund screening to find some potential opportunities that could be worthwhile to invest in. The last time I ran these valuations was toward the beginning of Q1 2024 , so it is quite due.

One of the important points to note is that the number of closed-end funds has been shrinking, and 2024 was no different. As of the latest CEFConnect data, they list only 400 funds. That's down from our prior screening when they had data for 422 CEFs. That said, there are the Saba funds that they no longer provide updated data for, though: Saba Capital Income & Opportunitites Fund ( BRW ) and Saba Capital Income & Opportunitites Fund II ( SABA ). So BRW and SABA count for two of the disappearing funds, but otherwise, the number was reduced through numerous mergers and/or conversions into an ETF structure....

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