We show that hyperbolic discounting is key for understanding the closed-end fund puzzle, which is the persistent deviation between the market prices of closed-end funds and net asset value (NAV) of their underlying assets. Hyperbolic-discounting individuals are willing to utilize illiquid underlying assets as commitment devices to avoid time-inconsistent consumption plans. Consequently, more liquid closed-end funds trade at discounts to their NAV. We establish the conditions under which the discounts and premiums arise in the prices of closed-end funds.