The Best Closed-End Funds (CEFs) to Buy Now
The best closed-end funds (CEFs) remain highly popular with income-seeking investors even amid the rise of exchange-traded funds.
Ever since the first U.S.-listed exchange traded fund (ETF) launched in January 1993, the number of investable products competing for a finite pool of investor capital has steadily increased.
That competition has fueled rapid innovation in ETFs, but it's also contributed to the decline of older fund structures. Mutual funds, in particular, have steadily lost ground.
Framing this trend as a battle between ETFs and mutual funds leaves out other fund types that have fallen out of the spotlight. Chief among them are closed-end funds, or CEFs.
Today, CEFs rarely come up outside of year-end tax-loss harvesting discussions or income-focused investor circles, yet some have long track records and enviable yields.
Structurally different from both ETFs and mutual funds, CEFs introduce unique risks tied to leverage, premiums and discounts and taxes.
Here's what you need to know about closed-end funds, including the best CEFs to buy in 2026.
Your 2026 closed-end fund crash course
Closed-end funds are defined by four basic features: the ability to trade at discounts or premiums to net asset value (NAV); high yields via managed distribution policies; access to less liquid assets; and the use of leverage.
The number of CEF shares is generally fixed at inception, aside from possible secondary or rights offerings. Because there is no ongoing creation or redemption mechanism, CEFs can trade at prices that diverge materially from NAV.
These premiums and discounts can work for or against investors. Buying at a wider-than-normal discount and later seeing it narrow can add to returns, but there is no guarantee this ever happens.
Income is another defining feature. CEFs are frequently structured to deliver high and steady payouts. Those distributions can come from multiple sources: portfolio income, such as dividends or bond coupons; option strategies, like covered calls; or from realized capital gains via selling appreciated securities.
In many cases, however, CEF distributions also include a sizable return of capital portion, which isn't immediately taxable and decreases your adjusted cost basis.
The closed-end structure also gives CEF managers more flexibility to own less liquid assets such as private credit or private equity. In contrast, open-end funds have to manage daily inflows and outflows, which creates a constant need for liquidity.
Leverage is the final major quirk that tends to polarize CEF investors. Many CEFs borrow against their assets to amplify returns and income. A fund with $1 billion in assets that borrows an additional $100 million is effectively leveraged about 1.1 times.
Leverage can enhance performance and boost yields, but it also magnifies losses and introduces borrowing costs. Those costs are one reason CEF expense ratios are typically higher than those of ETFs. None of these traits are inherently good or bad. They simply make CEFs different from mutual funds and ETFs.
How we picked the best CEFs for 2026
We focused on identifying five best-in-class CEFs that strike a reasonable balance across different strategies, asset classes and risk profiles. That meant looking beyond short-term metrics and emphasizing characteristics that matter to long-term investors.
We prioritized CEFs that have been operating for many years and have reached a size that reduces the risk of liquidation or forced restructuring. And we generally limited our selections to funds with at least $1 billion in assets under management.
For each fund, we focused on transparency and investor understanding rather than rigid screening rules. We highlight key data points such as expense ratios, current distribution rates, premiums or discounts to NAV, and leverage employed to provide context.
The result is not a formula-driven list, but a curated selection designed to help investors understand what they are buying and why a given CEF may or may not belong in a long-term portfolio.
Adams Diversified Equity Fund
- Assets under management: $2.9 billion
- Expense ratio: 0.50%
- Price vs NAV: -5.1% discount
- Distribution rate (price): 7.53%
- Leverage employed: 0%
The Adams Diversified Equity Fund (ADX) is among the oldest listed entities on the New York Stock Exchange, dating back to 1929. Before becoming a CEF, it operated as Adams Express, a stagecoach company that successfully reinvented itself as an investment company once railroads displaced its original business.
ADX follows a straightforward mandate, and the actively managed portfolio with a clear long-term orientation includes U.S. large-cap stocks that look at lot like components of the S&P 500.
One of its defining features is its managed distribution policy. Historically, ADX paid modest quarterly distributions followed by a large year-end payout tied to realized capital gains. More recently, it shifted to a smoother structure targeting 2% of NAV per quarter, or roughly 8% annually.
ADX also stands out for its low cost within the CEF universe. With a 0.50% expense ratio, a $10,000 investment incurs about $50 per year in fee drag, which is unusually modest.
Finally, unlike many CEFs, ADX does not use leverage at all. And, over the past decade, the fund has delivered a 14.4% annualized return based on NAV.
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PIMCO Dynamic Income Fund
- Assets under management: $7.4 billion
- Expense ratio: 1.67% (4.46% including interest expense)
- Price vs NAV: +4.45% premium
- Distribution rate (price): 15.77%
- Leverage employed: 31.97%
The PIMCO Dynamic Income Fund (PDI) is run by a firm with a long history in bond management and a brand that still carries weight with many income investors. This PIMCO fund's mandate is flexible, and it typically builds its portfolio across multiple higher-yielding credit sectors rather than sticking to plain-vanilla investment-grade bonds.
In practice, that often means meaningful exposure to non-investment-grade corporate credit, or junk bonds, alongside securitized holdings such as non-agency mortgage-backed securities and other structured credit, with the mix shifting as PIMCO's managers see relative value.
The other defining feature is leverage. For every $100 of investor capital, PDI is currently borrowing roughly $32 to increase exposure. Pairing leveraged exposure with a portfolio tilted toward higher-yielding credit is a big part of how the fund supports its 15.77% distribution rate.
However, investors still need to pay attention to valuation and cost. PDI often trades at a premium to NAV, reflecting both its popularity and PIMCO's reputation, and that premium can widen or narrow independent of what the underlying holdings are doing.
The fund trades at a 4.45% premium, which is notably lower than its 52-week high premium of 17.57% in September.
The stated expense ratio is 1.67%, but once interest expense tied to leverage is included, total costs rise to 4.46%, which can be a drag.
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Tortoise Energy Infrastructure
- Assets under management: $1.4 billion
- Expense ratio: 1.20% (2.12% including interest expense)
- Price vs NAV: −5.24% discount
- Distribution rate (price): 12.97%
- Leverage employed: 26.20%
CEFs like Tortoise Energy Infrastructure (TYG) once allowed investors to gain master limited partnership (MLP) exposure without the complexity of Schedule K-1 tax forms by sending unitholders a single Form 1099-DIV.
TYG continues to follow this legacy approach, offering exposure to energy "middlemen" in a tax-simplified wrapper, with a portfolio spanning natural gas infrastructure, liquids pipelines and power infrastructure assets.
Despite its reputation as an MLP-focused fund, MLPs make up only about 20% of the portfolio today. The remaining roughly 80% consists of common equity holdings, primarily midstream energy stocks.
The fund's high distribution rate reflects both the income-oriented nature of the midstream sector and the pass-through characteristics of MLPs, in addition to the use of leverage and return of capital.
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Reaves Utility Income Fund
- Assets under management: $3.8 billion
- Expense ratio: 0.88% (2.09% including interest expense)
- Price vs NAV: +0.07% premium
- Distribution rate (price): 5.77%
- Leverage employed: 18.84%
TYG is not the only sector-specific closed-end fund investors gravitate toward for income. Another long-standing and widely followed option is the Reaves Utility Income Fund (UTG), which applies a similar closed-end structure to utility stocks.
The portfolio primarily holds dividend-paying stocks, but it can also allocate to preferred stock and bonds, giving the managers flexibility across the utility capital structure.
UTG makes meaningful use of leverage, currently around 19% of total assets. That leverage helps boost income potential, but it also raises interest expense and introduces sensitivity to rising interest rates.
Utilities can face headwinds in higher-rate environments because they are capital-intensive businesses that rely on borrowing, and their cash flows tend to be less attractive when yields elsewhere rise.
Despite those risks, UTG has delivered solid long-term results for investors willing to hold through cycles. Over the past 10 years, the fund's net asset value has compounded at an annualized rate of 10%.
While the current 5.8% distribution rate is not the highest among CEFs, the payout has historically been sustainable. And the distribution is paid monthly, which appeals to income-focused investors seeking consistency.
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Sprott Physical Gold and Silver Trust
- Assets under management: $8.7 billion
- Expense ratio: 0.45%
- Price vs NAV: −4.81% discount
- Distribution rate: 0%
- Leverage employed: 0%
The closed-end fund structure is also well suited to holding commodities, not just equities and fixed income.
One of the most recognizable issuers in this space is Sprott, a specialist asset manager focused on precious metals and mining-related investments. Sprott's lineup of physically backed commodity CEFs spans gold and silver as well as platinum, palladium, uranium and copper.
The Sprott Physical Gold and Silver Trust (CEF) combines physical gold and silver in a single vehicle, with the current allocation split at roughly 59% gold and 41% silver.
It does not use leverage, and it does not pay a distribution. That simplicity makes it appealing as a satellite allocation for investors seeking direct exposure to precious metals.
CEF also tends to trade closer to its NAV than many competitors, and it's currently available at only a modest discount. With a 0.45% expense ratio, it ranks among the more affordable CEFs, even undercutting even the venerable ADX.
Learn more about CEF at the Sprott provider site.
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