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CEF Specialist

The CEF Bargain Bin: Nuveen Municipal Funds

We look at some relatively undervalued CEFs and discuss macroeconomic hedging strategies.

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The last few weeks have been stressful and exciting for many closed-end fund investors. Specifically, it has been stressful for those looking to unload their shares, and exciting for those looking to add to their investments. With Fed chairman Ben Bernanke hinting that interest rates might potentially rise in the relatively near future, leveraged fixed-income vehicles have fallen out of favor. But while sell-offs in bond markets have negatively impacted CEF net asset values, share prices have fallen even quicker as investors flocked to the exits. This has been especially prevalent among leveraged municipal funds, which tend to be highly sensitive to changes in interest rates.

Two of our recent weekly articles highlighted funds that, among the turmoil, appeared undervalued on a relative basis. As many of our readers aptly pointed out, however, some of these discounts exist for good reason. Like digging through a real-life bargain bin, the contents are often unwanted or outright defective.

Steven Pikelny does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.