(MONEY Magazine) – Last year's stock market crash may have soured investors on equities, but it left them hungry for income-paying investments. Among the prime beneficiaries of that new appetite have been the sponsors of closed-end bond funds. These ( hybrid investments, which operate like bond mutual funds but are traded like stocks, have been rolling out this year at a rate of more than three a month. They now number at least 80, a 76% increase since January. As with the more familiar open-end funds listed in Fund Watch, closed-end portfolios cover the fixed-income spectrum, from junk to U.S. Government bond funds and from global income to single-state tax-exempt funds. Salesmen claim that the closed-ends provide higher yields and greater price stability. And for once they are right -- if you can get the fund at a discount. Like a conventional fund, a closed-end is run by a professional money manager in accordance with goals stated in the fund's prospectus. The crucial difference is in how shares are issued. An open-end fund continuously creates new shares whenever investors put more money into the fund, while a closed-end typically issues shares to the public only once -- at the fund's initial public offering, or IPO. After the IPO, anyone who wants to get into the fund must buy from a current shareholder via the stock market, where everything sells for whatever buyers are willing to pay. Depending on how eager buyers are, then, the price may be more or less than the net asset value -- the per- share value of the fund's portfolio. Odds are, your broker gets excited about closed-end funds only during the IPO. That's because the offering price typically includes a 7% sales charge; once the fund starts trading on the market, brokers must settle for the usual stock commission of 2% or less. You, on the other hand, should ignore most IPOs. Because of the sales charge, if you decided to buy a share at an offering price of, let's say, $10, you would own only $9.30 worth of bonds. After the IPO, the fund typically continues to trade above the net asset value for a few months, but this disparity -- called a premium -- almost always disappears or even turns into a discount. That is your chance to strike. If the fund in the example above was trading at a 10% discount, the same $9.30 of net asset value would cost you only $8.54 (assuming a 2% commission). Similarly, if the fund paid a $1 dividend, it would yield 10% to buyers at the IPO; but it would yield 11.7% to anyone who picked it up at 10% off. (Closed-end stock funds can also be a bargain at a discount. See the story in Wall Street on page 16.) You can find listings of closed-end bond funds -- including net asset value, share price and any premium or discount -- on Wednesdays in the Wall Street Journal and major local newspapers. Most closed-end bond funds were recently trading around their net asset value or slightly above, but there are bargains to be had. Tom Herzfeld, a closed-end specialist in Miami, recommends Excelsior Income Shares, which recently traded on the New York Stock Exchange at $15.25, a full 10.8% below its net asset value. Another on Herzfield's list is Lincoln National Convertible (NYSE, $11.75), recently at a 14.2% discount. Steven Samuels of Drake Capital in Santa Monica likes Vestaur Securities (NYSE, $12.87), a corporate bond fund recently selling at a 7% discount.