The term “accretion of discount” typically refers to the process of adjusting the value of an investment or asset that is trading below its intrinsic value. This concept is often associated with the valuation of securities, particularly in the context of closed-end funds.

In the case of closed-end funds, the market price of the fund’s shares may trade at a discount or premium to its net asset value (NAV). The NAV is the total value of the fund’s assets minus its liabilities, divided by the number of outstanding shares. If the market price of the fund’s shares is lower than its NAV per share, it is said to be trading at a discount.

Accretion of discount occurs when the market price of the closed-end fund’s shares gradually increases over time and converges towards its NAV. This process may happen for various reasons, such as improved market sentiment, better performance of the fund’s underlying assets, or changes in the fund’s management or strategy that are perceived positively by investors.

Investors may find the accretion of discount appealing because it implies that they can potentially realize capital gains as the market price of the fund’s shares appreciates towards the NAV. However, it’s important to note that accretion is not guaranteed, and various factors can influence the market price of a closed-end fund, including market conditions, interest rates, and overall investor sentiment.

It’s worth noting that while the term “accretion of discount” is commonly associated with closed-end funds, similar concepts may be applicable to other types of investments or assets that trade at a discount to their intrinsic value. In general, investors often seek opportunities where the market price of an asset has the potential to increase, closing the gap between its current price and its perceived fair value.