Unlocking Value in the Liberty All-Star Growth Fund: A Deep Dive into NAV Discounts and Income Potential

For income-focused investors navigating a landscape of historically narrow closed-end fund (CEF) discounts, the Liberty All-Star Growth Fund (ASG) emerges as a compelling anomaly. As of September 4, 2025, ASG trades at a -7.76% discount to its net asset value (NAV), significantly wider than the average -7.53% discount over the past 52 weeks [1]. This discount, coupled with a robust 8.59% distribution rate and a portfolio skewed toward high-growth technology stocks, positions ASG as a strategic opportunity in a market where many peers trade at tighter discounts or premiums.

The Attraction of a Wide NAV Discount

NAV discounts represent the gap between a fund’s market price and its underlying asset value, often reflecting market sentiment or liquidity imbalances. For ASG, the current -7.76% discount [1] suggests undervaluation relative to its portfolio’s intrinsic worth. This is particularly striking when compared to peers like the Allspring Multi-Sector Income Fund (ERC), which trades at a narrower -4.88% discount [2], and the Pioneer Diversified High Income Fund (HNW), which recently reported a -5.02% discount [3]. Such disparities highlight ASG’s potential for capital appreciation if the discount narrows toward historical averages.

The discount’s persistence may stem from ASG’s focus on growth-oriented equities, which have faced temporary skepticism amid macroeconomic uncertainties. However, this dynamic creates an entry point for investors who recognize the fund’s exposure to resilient sectors. For instance, ASG’s portfolio is weighted 56.35% toward “sensitive” sectors (e.g., technology, consumer discretionary) and 29.71% in technology itself, with top holdings including NVIDIA Corp, Microsoft Corp, and Apple Inc [1]. These allocations align with long-term trends in digital transformation, offering both growth and income potential through dividends from industry leaders.

Yield Potential and Portfolio Structure

ASG’s 8.59% distribution rate, translating to $0.12 per share quarterly, is supported by a diversified portfolio of 119 holdings [1]. While the fund is not leveraged—unlike some CEFs that amplify yields through debt—its income stream remains attractive, with a current yield of 6.08% as of September 5, 2025 [1]. This yield outperforms many equity-focused CEFs and provides a buffer against market volatility, particularly in a low-interest-rate environment.

The fund’s non-leveraged structure also reduces risk for income-focused investors. By avoiding leverage, ASG prioritizes capital preservation while maintaining exposure to high-quality growth stocks. This approach contrasts with peers like ERC, which relies on non-investment-grade debt and emerging market securities to generate its 9.44% yield [4]. While such strategies can deliver higher returns, they also introduce credit and liquidity risks that may not align with conservative income goals.

Strategic Positioning in a Low-Discount Environment

The broader CEF market has seen tightening discounts in recent years, driven by improved investor sentiment and accommodative monetary policy. However, ASG’s persistent -7.76% discount [1] suggests it remains undervalued relative to its peers. For example, HNW’s discount improved from -8.47% in April 2024 to -5.02% by April 2025 [3], illustrating how market dynamics can drive discount convergence. If ASG follows a similar trajectory, investors could benefit from both income and capital appreciation.

Moreover, ASG’s portfolio tilt toward mega-cap technology stocks—now representing a significant portion of its holdings—positions it to capitalize on sectoral outperformance. Companies like NVIDIA and Microsoft have demonstrated resilience amid economic cycles, and their inclusion in ASG’s portfolio enhances its appeal as a defensive-growth vehicle. This alignment with high-margin, innovation-driven sectors could further justify a narrower discount over time.

Conclusion: A Dual-Pronged Opportunity

The Liberty All-Star Growth Fund presents a unique confluence of income and growth potential for investors. Its wide NAV discount offers a margin of safety, while its 8.59% distribution rate and technology-centric portfolio provide exposure to high-conviction sectors. In a market where many CEFs trade at compressed discounts, ASG’s valuation divergence represents a strategic entry point for those seeking to balance yield with long-term capital appreciation.

As always, investors should monitor macroeconomic signals and sector-specific risks, but for now, ASG’s structure and valuation make it a standout in the CEF universe.

Source:
[1] ASG Liberty All-Star Growth, closed-end fund summary [https://www.cefconnect.com/fund/ASG]
[2] ERC Allspring Multi-Sec Inc, closed-end fund summary [https://www.cefconnect.com/fund/ERC]
[3] Pioneer Diversified High Income Fund, Inc. [https://www.sec.gov/Archives/edgar/data/1388126/000119312525157001/d940384dncsr.htm]
[4] Allspring Multi-Sector Income Fund (ERC) [https://stockanalysis.com/stocks/erc/]