June 10, 2019

The Month in Closed-End Funds: May 2019

by Tom Roseen.

REUTERS/Brendan McDermid

For the month, 43% of all CEFs posted NAV-based returns in the black, with only 14% of equity CEFs and 65% of fixed income CEFs chalking up returns in the plus column. For the first month in three, Lipper’s mixed-asset CEFs macro-group (-2.39%) mitigated losses better than or outpaced its two equity-based brethren: domestic equity CEFs (-3.30%) and world equity CEFs (-4.88%). For the first month in seven, the Real Estate CEFs classification (+0.11%, the only plus-side return in the CEF equity universe) outperformed all other equity classifications, followed by Utility CEFs (-1.85%) and Income & Preferred Stock CEFs (-1.92%).

For the second month in three, municipal bond CEFs jumped to the top of the leaderboard, posting a plus-side return on average (+1.86%), followed by domestic taxable bond CEFs (-0.28%) and world income CEFs (-0.30%). Four of the domestic taxable fixed income CEF classifications posted plus-side returns for the month, with Corporate BBB-Rated Debt CEFs, U.S. Mortgage CEFs (+0.89%), and Corporate BBB-Rated Debt CEFs  (Leveraged) (+0.79%) posting the strongest returns of the group. For the seventh consecutive month, the municipal debt CEFs macro-group posted a return in the black on average, with all the classifications in the group experiencing plus-side returns for May.

For May, the median discount of all CEFs widened 54 bps to 8.12%—still narrower than the 12-month moving average median discount (8.64%). In this report, we highlight May 2019 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the first month in five, equity closed-end funds (CEFs) on average suffered negative returns, declining 3.44% on a net-asset-value (NAV) basis for May, while for the fifth month in a row, fixed income CEFs chalked up returns on the plus-side (+0.67%).
  • Only 17% of all CEFs traded at a premium to their NAV, with 19% of equity CEFs and 15% of fixed income CEFs trading in premium territory. The single state municipal debt CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—64 basis points (bps) to 9.82%.
  • Real Estate CEFs (+0.10%) posted the only positive returns of all equity CEF classifications for the month.
  • The California Municipal Debt CEFs classification (+2.00%) posted the strongest plus-side returns in the fixed income universe for the month.
  • For the seventh month in a row, the municipal debt CEFs macro-group posted a plus-side return on average (+1.86%), with all classifications in the group witnessing positive returns for May.

Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: May 2019 here.

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