Closed-end funds are an asset management company's dream business. The assets are almost completely "stuck" to the fund (unless an activist forces the fund to 'open') regardless of performance. But it should come as no surprise that many of these funds end up disappointing investors. When investors become disappointed they sell their shares in the closed-end fund on their respective exchange and move on, regardless of the fund's price relative to net asset value.

It's this system that forces many closed-end funds to trading below their net asset value. In fact, 82% of closed-end funds now trade for a discount to their net asset value, a significant increase since March (64%) according to an interesting article [subscription required] in today's Wall Street Journal.

I'd put "do not buy a closed-end fund at its IPO" as one of my core rules of investing. Many times investors are forced to pay a premium above net asset value when the fund first begins trading -- a move that investors regret most of the time.

However, that doesn't mean there's no opportunity in closed-end funds after they begin trading. In fact, funds at a deep discount to net asset value can often be very enticing value situations. When looking at funds below NAV I typically favor newly-discounted names (because it's often only due to one or two large sellers) or situations in which an activist is trying to convert the fund to being 'open-end' thus reverting the share price to its NAV.

Note: Premiums/discounts to net asset values can be found using ETFConnect.com.

With the caveat that strategies that lead to higher yields also entail higher risk, let's look at a trio of funds that use unusual strategies to boost their income. One focuses on buying stocks just before their ex-dividend dates, another uses currency swaps, and the third uses a covered call writing strategy.

First, a look at Alpine Dynamic Dividend Fund (ADVDX), a favorite of Carla Pasternak, editor of High Yield Investing. Apline is the only mutual fund included in her "10%-Plus Portfolio".

With its double-digit yield, she considers Alpine "one of the most attractive funds around." Not only that, she says, "its impressive 16.0% average annual return in the three years since inception puts it at the head of its category."

Pasternak explains, "The fund's savvy stock selection is part of its success. Lead portfolio manager Jill Evans is adept at finding undervalued stocks with good upside and dividend growth potential."

And, unlike most open-ended funds that are limited to specific investment strategies, Pasternak notes that Alpine can use just about any technique to lift returns.

The fund's favorite approach is the dividend capture strategy --- in which it will buy a stock right on the ex-dividend date and hold the stock for at least 61 days to take advantage of reduced federal tax rates. In this way, she explains, the fund rakes in more dividend income than it could from quarterly payments alone.

Pasternak adds, "The fund offers shareholders a tax-advantaged dividend stream, which means it can be held in a taxable brokerage account."

Pasternak also likes Lazard Global Total Return & Income (NYSE: LGI), which she notes offers a chance to buy blue chips at a discount. The closed-end fund invests in U.S. and foreign equities.

About half of its portfolio is in U.S. blue-chips like Microsoft (NASDAQ: MSFT), Bank of America (NYSE: BAC) and Exxon Mobil (NYSE: XOM). The other half focuses on big name British, Japanese, and other foreign-owned stocks.

She notes, "What sets LGI apart is its use of currency swaps to cushion its foreign holdings against currency volatility. The fund also uses leverage (borrows money) to pay for the currency swaps."

She explains, "Distributions over the past year of $2.34 provided a yield of 10.2%. The distribution includes a regular monthly $0.1042 payment, based on the fund's managed distribution policy, and $1.0294 in long-term capital gains. Expenses of 1.62% shave off some of that yield."

Meanwhile, she explains, the shares are now trading at a discount to the value of the fund's underlying holdings, meaning you can buy a dollar's worth of assets for less than a dollar.

Richard Lehmann, editor of the industry leading Forbes/Lehmann Income Securities Investor, also looks at an unusual global fund that uses a covered call writing strategy to generate high income.

Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund (NYSE: ETW) is a closed-end fund which, according to Lehmann, owns a diversified portfolio of common stocks of which 54.57% are United States issuers, 22.12% from Europe, 12.30% from the United Kingdom, 9,79% from Japan, and 1.22% in other areas.

To generate income, Lehmann explains, "They sell call options on a continuous basis on broad based domestic stock indexes and the same on broad based foreign country or regional stock indexes. The income generated by selling the calls makes up part of the fund's distributions, the rest are made up of dividends paid by the stocks the fund holds."

He also notes that the fund is "tax managed", which means it seeks to minimize and defer federal income tax. The sale of index options are considered 60% long-term capital gain and 40% short-term capital gains, no matter the holding period.

The advisor says, "We like the diversification this global fund provides since it is not dependent on interest rates or energy prices and is international in scope. At its current price of $20.32, the fund has an indicated yield of 8.86%. We rate the fund a buy below $21.00 for high-risk investors."

Steven Halpern is the editor of TheStockAdvisors.com, a free daily website which features the latest stock picks from the nation's leading financial newsletters.

Each year, Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Stocks Report.

The top conservative pick for 2007 from income specialist Carla Pasternak is The Zweig Total Return Fund (NYSE: ZTR). The editor of High Yield Investing says, "ZTR is a diversified closed-end fund that seeks a high total return (dividends, interest, and capital gains) by investing in both stocks and bonds

"Over half of ZTR's portfolio is in risk-free U.S. Treasuries. The balance is mostly in blue-chip dividend-payers. The Treasury bonds carry the highest credit rating possible with virtually no risk of default. They have an average duration of about six years, making the fund well positioned for a stable interest rate environment.

"The fund has paid dividends every month for the past two decades. Its latest monthly payment of $0.043 a share equates to $0.52 annually, providing a 9% yield at current share prices. A 1.02% management fee brings the effective yield to 8%.