Lipper Closed-End Funds Summary: January 2014

As investors contemplated the impacts of an overextended market along with mixed economic data during the month, equity markets took a hit, while fixed income securities charged back to life. For the third straight month equity and fixed income CEFs went their separate ways. As one might expect, given the slide in the broad-based indices, equity CEFs were in the red for January, losing on average 1.57% on a NAV basis (their first negative return since August 2013) and 1.67% on a market basis. Meanwhile, fixed income CEFs gained 2.56% and 3.44%, respectively, in a flight to safety by investors.

REUTERS/Michael Kooren

For January 70% of all CEFs posted NAV-basis returns in the black, with only 34% of equity CEFs and 93% of fixed income CEFs chalking up returns in the plus column. U.S. stocks witnessed some deep losses during the month as investor s fled equities and emerging-markets currencies in the face of China’s manufacturing slowdown and renewed fears of deflation in the Eurozone. This contributed to world equity CEFs’ (-4.05%) lagging domestic equity CEFs (-1.05%), while the slump in yields pushed the mixed-asset CEFs macro-group (+0.94%) to the top.

For the first month in four all of Lipper’s municipal bond CEF classifications posted returns in the black, with California Municipal Debt Funds (+4.35%) outpacing the other classifications in the group. Municipal debt CEFs (+3.95%) outpaced both their domestic taxable CEF (+1.27%) and world income CEF (-1.16%) counterparts for the month.

For January only 9% of all closed-end funds (CEFs) traded at a premium to their net asset value (NAV), with 8% of equity funds and 9% of fixed income funds trading in premium territory. The World Equity CEFs macro-group witnessed the largest widening of discounts for the month—63 basis points (bps) to 10.76%.

To read the complete Month in Closed-End Funds: January 2014 FundMarket Insight Report, please click here.