Back in early 2006, my Foolish colleague Rick Munarriz introduced the concept of investing in closed-end funds at a discount to net asset value (NAV). Thesetwo articles provide all the additional background you could desire. The key concept here is that closed-end funds, unlike standard open-end mutual funds, trade in the secondary market, opening up the possibility of a divergence between a fund share's price and its value.

If you've been dreaming of buying a mutual fund on sale, well, you might need to get out more. Nevertheless, you're in luck, because closed-end funds afford exactly such an opportunity.

Take Rick's example of Tri-Continental (NYSE:TY). At the time, the fund was trading at a 13% discount to its NAV. This year, that gap has narrowed to roughly 7%, thanks to some good old-fashioned shareholder activism. That narrowing translates to some seriously outsized year-to-date returns -- a 16.4% market return versus a respectable 8.8% NAV return.

Here are today's six steepest discounts on closed-end funds with more than $100 million in assets:

Fund

Asset Class

Discount to NAV

10-Year Average Discount

10-Year NAV Annualized Return

Morgan Stanley China A Share Fund (NYSE:CAF)

Pacific ex Japan

(21.8%)

N/A

N/A

China Fund (NYSE:CHN)

Pacific ex Japan

(17%)

(7.7%)

13.6%

Greater China Fund (NYSE:GCH)

Pacific ex Japan

(15.3%)

(14%)

9.4%

DWS Global Commodities Fund (NYSE:GCS)

Sector equity

(14.7%)

N/A

N/A

Swiss Helvetia Fund (NYSE:SWZ)

Western European

(14.3%)

(16.5%)

10.5%

ASA Limited (NYSE:ASA)

Sector equity

(14.2%)

(8.7%)

11.8%
Data provided by Closed-End Fund Association.

You might be shocked to see the preponderance of China funds here, in light of the country's monster stock returns. Indeed, Morgan Stanley's fund sports a year-to-date NAV gain of 71.7%. Who wouldn't want a piece of that action? Well, the skeptics are out in full force, and it appears that they are using this rare access to the exclusive A shares -- available to mainlanders and select qualified institutions -- to short China. That's right: You can short a closed-end fund. So the contrarians have opened up a chasm between the market price and the value of these funds -- if, that is, you believe the market valuations of the portfolio companies are fair. China reportedly sports a market P/E of about 50, so I'm less than eager to scoop up these "discounted" funds.

Since it's a relatively new fund, I can't say whether the DWS Global Commodities Fund warrants its relatively high 1.13% expense ratio. You can get similar exposure with a lower-expense iShares ETF, so the onus is on DWS to prove its value above and beyond a commodity index.

The best value today appears to be ASA Limited. The fund's expense ratio is nearly as low as that of the Gold Miners ETF (AMEX:GDX). Also, over the decades-long history of the fund, the discount to NAV has quickly evaporated numerous times. If you are a budding gold bug, this looks like a very attractive investment option.

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Fool contributor Toby Shute doesn't own any of the funds mentioned or shares in any closed-end fund, but he's keeping an open mind. The Motley Fool has a disclosure policy.