Seeking Alpha
Value, special situations, debt
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There are some amazing values now in closed end funds. The discounts to NAV have widened dramatically across the board. It appears that one or more large institutions with extensive closed end fund holdings are being forced to liquidate them. I noticed that Wachovia (NASDAQ:WB) is a big holder in many of the funds that have been getting hammered.

Typically, the sellers are in trouble because of something unrelated to what they sell. They can't sell the securities that got them in trouble (there is no market), so they sell whatever they can. This is a variation of Gresham’s Law (bad money drives out good money).

But the effects of these forced sales are usually temporary and I expect a sharp snapback rally shortly. There are many tremendous buys now. I would look to buy issues where the discount has widened dramatically, there are large distributions, and where there are catalysts to narrow the discount.

For example, yesterday I picked up some (NYSE:AOD). It traditionally has sold for a premium, but closed yesterday at a 24% discount to NAV. AOD pays large distributions (27 per cent a year)which allow you to recover this discount. The fund is run by Alpine who also runs open end funds. There is a chance they could roll AOD into an open end fund like ADVDX.

Source: Closed End Fund Fire Sale