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3 Little-Known Funds Paying Up to 18.8%

Barchart·11/02/2026 09:43:21

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Closed-end funds (CEFs) aren't nearly as well-known, nor well-held, as their more popular relatives: mutual funds and exchange-traded funds.

But that's no reason to avoid them.

CEFs have acted as staples of income portfolios for decades. They can be held in virtually any brokerage account or IRA, often sport very attractive yields, and, if timed well, they can also generate solid trading returns.

If you can think of an asset class, chances are good there is a CEF trading it. Closed-end funds can hold stocks, corporate bonds, tax-free municipal bonds and virtually every other asset under the sun. In fact, they can even hold some illiquid assets that are difficult or impossible to own within traditional mutual and exchange-traded funds. Not to mention, CEFs boast a few unique advantages that its relatives don't share, such as being able to use leverage to magnify exposure, trading at significant differences (which can mean discounts) to their net asset values (NAVs), and using options trading to supplement their primary strategies.

Today, I'll introduce you to three such funds paying up to 18.8%.

Disclaimer: This article does not constitute individualized investment advice. Individual securities, funds, and/or other investments appear for your consideration and not as personalized investment recommendations. Act at your own discretion.

The Best Closed-End Funds You Can Buy

Let’s take a look at a few of the top CEFs to buy for the rest of 2026 and beyond.

The following are three picks from my broader list of the best CEFs.

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Calamos Strategic Total Return

Style: Moderately aggressive allocation
Assets under management: $3.6 billion
Distribution rate: 8.0%
Distribution frequency: Monthly
Expense ratio: 3.69%, or $36.90 per year on $1,000 invested

I've been starting this list with the Calamos Strategic Total Return (CSQ) for quite some time not just because it has historically been an excellent fund, but because it also helps demonstrate a couple of the core ideas I mentioned above.

Calamos Strategic Total Return is an "allocation fund" (aka "balanced fund"), which means it invests in both stocks and bonds. Most allocation funds stick with a predetermined ratio; Morningstar categorizes CSQ as a "moderately aggressive allocation" product, defined as having 70% to 85% of assets invested in equities, and the remainder invested in fixed income.

CSQ doesn't always aim for that level—it actually only pledges to include "at least 50% in equities"—but at two-thirds of its assets currently invested in stocks, it's close. And those equity holdings are similar to what you'd see in an S&P 500 or other large-cap fund right now: a lot of blue-chip names with a big emphasis on technology (roughly a third of assets). Top equity holdings right now include the likes of Nvidia (NVDA), Apple (AAPL), and Google parent Alphabet (GOOGL). The CEF's remaining assets are spread among a variety of fixed-income securities; predominantly convertible debt and high-yield corporate bonds, but also preferred stock, asset-backed securities (ABSes), and other issues.

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Calamos Asset Management founder John Calamos and a team of advisers commonly use a healthy heaping of debt leverage; it's almost 30% right now, which is on the higher side. Remember what I said above: Leverage lets management to invest more than its actual assets in hand. That's a double-edged sword: It improves the fund's yield and amplifies gains when the fund's assets grow in value, but it can also amplify losses. So while CSQ's portfolio has less stock exposure than a typical moderately aggressive allocation fund, that high leverage makes the fund more aggressive—and thus its performance is more volatile—than other mutual funds or ETFs in the category.

Calamos Strategic Total Return has historically performed in line with the S&P 500, with periods of outperformance on the way up, and underperformance on the way down. The fund's total return (price plus distributions) is behind the S&P 500 by 3 percentage points year-to-date, though it has led the index at various points. That's saying something given that CSQ is a stock/bond portfolio while the S&P 500 is all equities.

The lion's share of CSQ's distributions come from capital gains; very little is income. And it's a monthly payer, so we're getting those distributions frequently.

Lastly, shares currently trade at a nice 9% discount to NAV, which is cheap relative to its five-year average discount of 3%.

Pimco Dynamic Income Fund

Style: Multisector bond
Assets under management: $6.7 billion
Distribution rate: 18.8%
Distribution frequency: Monthly
Expense ratio: 4.46%, or $44.60 per year on $1,000 invested

Bond yields surged higher for most of 2022 and 2023, which wreaked havoc on many fixed-income portfolios. (The math on bonds is simple: If bond yields go up, then prices come down, and vice versa.) But lower interest rates over the past couple of years have sent bond yields back to earth—and bond prices back to life.

Experts started the year anticipating the Federal Reserve to continue pressing down on rates, but thanks to persistent inflation, the central bank actually raised its benchmark federal funds rate by a quarter-point in September ... and the market expects additional rate hikes in the coming months. That's a difficult environment for investing in fixed income, which could be enough reason for many to hand off their bond allocation to a seasoned management team.

Let them figure it out.

On that front, it's difficult to do better than Pimco Dynamic Income (PDI), a "multisector" bond fund. Multisectors invest in all sorts of debt (obvious), and they typically invest a good deal of assets in bonds that either aren't rated or rated below investment grade, aka junk (less obvious).

Unsurprisingly, PDI's fund description screams "wide," with the fund offering access "to Pimco's best income-generating ideas across multiple global fixed income sectors" and investing in a portfolio of debt obligations and other income-producing securities of any type and credit quality, with varying maturities and related derivative instruments."

Currently, managers Daniel Ivascyn, Alfred Murata, and Joshua Anderson have a roughly 65/35 blend of U.S. and global debt that's thickest in high-yield corporate bonds (yet another term for junk) and non-agency mortgage securities. But it also owns non-U.S. developed-market debt, emerging-market debt, investment-grade bonds, commercial mortgage-backed securities, municipal bonds, and more.

A heavy tilt toward short- and moderate-term maturities lead to an overall effective maturity of 8.9 years. The portfolio has a duration (a measure of interest-rate risk) of 4.9 years, which in plain English means a 1-percentage-point rise in market interest rates would knock PDI lower by 4.9% in the short term, while a 1-point decline in rates would lift the fund by 4.9%. However, that duration is measured without accounting for leverage; PDI uses plenty of it, at 36% as I write this, which means the portfolio is going to be more volatile than the relatively low headline duration would indicate.

Still, Pimco Dynamic Income has performed in the top quartile of its peers or better across every meaningful time frame. And the fund is dirt-cheap right now; while it trades at a mere 4% discount to NAV, that's actually a steal compared to its five-year average premium of about 8%. Meanwhile, its distribution rate is simply wild, at nearly 19%.

General American Investors

Style: Large-cap stock
Assets under management: $1.5 billion
Distribution rate: 10.0%
Distribution frequency: Annually
Expense ratio: 1.07%, or $10.70 per year on $1,000 invested

General American Investors (GAM) is the type of fund you should own if you want traditional large-cap exposure in CEF format.

General American Investors, founded in 1927, is the oldest surviving CEF—a pretty straightforward and narrow fund that seeks out growth stocks trading at reasonable prices. President, CEO, and Portfolio Manager Jeffrey W. Priest has built a portfolio of roughly 65 predominantly large-cap stocks. Some top holdings, such as Berkshire Hathaway (BRK.B) and Apple, can be found at the top of most large-cap index funds. But Priest has also put an emphasis on a few midsized and smaller large caps, such as waste disposal company Republic Services (RSG) and insurer Arch Capital (ARCH).

GAM uses a moderate amount of leverage (10% currently). Between that and the low-yield nature of its holdings, you might correctly guess that a decent chunk of the fund's yield comes from sources other than true dividends. Fortunately, these capital-gains distributions are almost always long-term in nature, so they're tax-friendlier than many trade-happy large-cap CEFs.

The annual distribution schedule leaves something to be desired. But it's hard to complain about returns: Over the past 30 years, GAM has massively outperformed the S&P 500, by about 2,680% to 1,790%, on a total-return basis.

General American Investors trades at a 13% discount to NAV, which appears pretty steep at first glance. It's not bad, but it is pricier than GAM's 15% average discount across the past five years.

Learn More About These and Other Funds With Morningstar Investor

If you're buying a fund you plan on holding for years (if not forever), you want to know you're making the right selection. And Morningstar Investor can help you do that.

Morningstar Investor provides a wealth of information and comparable data points about mutual funds, ETFs, and CEFs—fees, risk, portfolio composition, performance, distributions, and more. Morningstar experts also provide detailed explanations and analysis of many of the funds the site covers.