Investors who discovered global mutual funds last year and made a bundle may think themselves pretty shrewd. But those who played the global game with closed-end funds, which trade like stocks, left them in the dust. The average international closed-end fund--and a majority of closed-end equity funds do invest abroad--gained 52% in net asset value (NAV) and 72% by the market appreciation of their shares. By comparison, mutual funds investing abroad logged an average 42% gain.

But before you buy a ticket on the closed-end express, be aware that making money in these funds takes a lot of work--and nerve as well. The funds are usually smaller in size and less diversified than their mutual-fund cousins, traits that tend to supercharge their gains in bull markets and accentuate the losses in a bear climate. Even the Brazil Fund, which earned the highest rating for risk-adjusted performance in the BUSINESS WEEK Closed-End Fund Scoreboard, has given shareholders a very wild ride. Its shares were down 48% and 4% in 1990 and 1992 and up 123% and 62% in 1991 and 1993.

BARGAINS LEFT. The Scoreboard can help you navigate the closed-end world. True, the Brazil Fund's risk is very high, but the Latin American Investment Fund and Templeton Emerging Markets earned nearly the same returns with far less volatility. The Scoreboard also covers closed-end bond funds, which, on average, beat their mutual-fund counterparts by several percentage points.

What makes investing in a closed-end fund tricky is that it usually sells at a premium to its NAV when hot and at a discount when it's out of favor. American Investment and Templeton Emerging Markets are top-notch funds, but they're selling at double-digit premiums. So investors interested in those areas might well look for similar mutual funds instead. Paying the 5.75% sales charge of the Templeton Developing Markets Fund is better than buying the closed-end Templeton Emerging Markets, with a 14.6% premium before brokerage commissions--if that premium suddenly shrivels up.

But there are still bargains among the best funds. First Financial and Southeastern Thrift & Bank funds sell at discounts. Perhaps, with short-term interest rates moving up, investors believe that the best days of these funds are behind them. "Looking ahead, I wouldn't expect the same kind of megareturn from these funds," says Catherine Gillis of Morningstar Inc., which provides the data for the Scoreboard. "But they're not going to crash and burn, either." Gillis thinks two more diversified U.S. closed-ends make good contrarian plays, too: General American Investors and the Jundt Growth Fund. Both invest in large-capitalization growth stocks, which are out of favor, and both sell at discounts.

Foreign investing made its mark on the closed-end bond funds, too. International and multisector funds--which blend foreign bonds with U.S. government and high-yield corporates--outpaced all but the pure junk funds. Three multisector funds won top ratings in the Scoreboard, and they trade at discounts.

LOOK-ALIKES. In fact, all across the universe of closed-end bond funds, premiums are shrinking and discounts widening. Now, the average fund trades at a 0.7% discount vs. a 2.5% premium a year ago. One reason, says closed-end fund maven Thomas J. Herzfeld, is that bond-fund managers have saturated the market with "too many look-alike funds." Then there are the dividend cuts. On Feb. 11, for instance, the BlackRock Closed-End Funds slashed dividends on 10 funds an average of 9.7%, lowering prices an average 4% in two days.

Herzfeld, who manages portfolios of closed-ends, sees dividend cuts as a buying opportunity and bought BlackRock funds that others were dumping. That's fine for Herzfeld, who trades these funds full-time. But it could be a dicey strategy now for the buy-and-hold crowd. The same funds that are getting battered from the impact of falling rates may get hit again if rates continue to climb. Especially vulnerable are leveraged bond funds, which use borrowed money or preferred stock to increase the size of their portfolios.

Still, where there's risk, there's opportunity. And the place to start your search is in the Scoreboard, which begins on page 97.

TABLE: The Best Closed-End Funds
      Of the 225 closed-end funds in the Mutual Fund Scoreboard, only these 13 earned three upward-pointing arrows, the highest ranking for risk-adjusted total return for the 1991-93 period.
              Average annual total return*     Risk           Investment obj.
      BRAZIL                         56.0%     Very high      Latin America
      EMERGING MEXICO                49.9      High           Latin America
      FIRST FINANCIAL                67.9      Low            U.S.
      LATIN AMERICA INVESTMENT       53.1      Average        Latin America
      SOUTHEASTERN THRIFT & BANK     49.1      Very low       U.S.
      TEMPLETON EMERGING MARKETS     51.0      Low            World
      CIGNA HIGH-INCOME              34.0%     Low            Corporate high-yield
      FRANKLIN MULTI-INCOME          28.4      Average        Multisector
      FRANKLIN UNIVERSAL             31.3      Average        Multisector
      HIGH-INCOME ADVANTAGE II       31.6      Low            Corporate high-yield
      KEMPER MULTI-MARKET INCOME     27.1      Low            Multisector
      PUTNAM HIGH-INC. CONVERTIBLE   30.6      Very low       Convertible
      PUTNAM MANAGED MUNI. INCOME    15.0      Low            Municipal
      *1991-1993. Pretax return based on net asset value appreciation plus reinvestment of dividends and capital gains
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