Closed-end funds differ from open-end mutual funds in that the size of the assets under management does not change when investors buy in or sell out. So when you want to buy a share in a closed-end fund, you have to buy it from someone who already has one (not the fund manager, as you would for an open-end fund). As such, many closed-end funds trade like regular stocks on the NYSE.
Often, however, many of these funds trade at discounts to what they actually own. For example, here's a list of some of the largest discounted funds currently on North American exchanges (according to CEFA on July 28th):
There are many papers devoted to the topic of explaining the discounts (and premiums) that closed-end funds trade at. These discounts represent an opportunity to buy the assets under management for pennies on the dollar. Often these assets represent public companies that an investor can buy himself. Therefore, arbitrage opportunities, which we've discussed here, can emerge. However, in most cases the investor will not know the changes the fund has made to its portfolio until after the quarter is over, which can make his arbitrage attempts difficult if there's a lot of churn.
In other cases, the fund's assets are not invested in public companies. As such, the market values of the holdings are unknown, and so investors often punish the market value of the fund, creating a discount, since the fund's holdings are illiquid and of relatively unknown value.
Value investors may appreciate the fact that they can buy assets for a discount in the form of closed-end funds, but they should always do their homework (i.e. read the fund's quarterly reports) to ensure they understand what they are buying.