By Michael Aneiro

Jeff Margolin. a closed-end fund Analyst at First Trust. sees some bargains out there for muni investors over the past week. The broad-based muni selloff earlier this month was brought about by what he calls a perfect storm of seasonal market weakness coupled with investors shifting more money into a strengthening stock market, all while the average closed-end muni fund had reached a premium to net asset value, giving investors an excuse to take some profits.

But as is often the case, Margolin says, CEFs share prices tend to overreact during market downturns, and muni CEFs fell by about 4.5% at a time when NAVs were only down 0.5%. Early this week, amid a muni market rebound. Margolin says the average muni CEF was trading at a 1.1% discount to NAV, versus an average 3.19% premium over the past 6 months.

We had a similar period of weakness in closed-end funds last year, and we did have a snap-back in the spring, he says. Part of it was that equity markets went through a correction.

Some of the more noteworthy muni closed-end funds include the non-levered Nuveen Municipal Value Fund (NUV ) and the levered Nuveen Premium Income Municipal Fund (NPM ), along with the BlackRock MuniYield Quality Fund  (MQY ).

Margolin says closed-end fund investors have gotten a bit spoiled the past few years with solid muni fund total returns, and says investors should keep an eye on CEFs in two other areas: stocks and bank loans. He says domestic equity CEFs still trade at a discount to NAV on average, despite the strong first quarter for stocks. Retail investors are still skittish about investing in equities, he says, but it wouldn’t surprise me, if we have a good year, if these funds move to premiums.

Looking at bank loan funds, such as the PowerShares Senior Loan Portfolio (BKLN ) and the ING Prime Rate Trust (PPR ), Margolin says the underlying leveraged loan asset class still trades at a slight discount to par value despite recent record loan inflows. but the average fund trades at a 3% or 4% premium to NAV, so you should look to pick your spots when buying these funds.

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