Lipper Closed-End Funds Summary: April 2014

Despite concerns of a lackluster Q1 reporting season and continued geopolitical worries, for the third consecutive month equity and fixed income CEFs posted plus-side NAV-based returns (+1.25% and +1.56%, respectively) for April. During the month investors had to weigh the impacts of additional economic sanctions on Russia as the result of increased conflicts in Ukraine and the sudden sharp declines in biotechnology and Internet stocks. Market gurus were calling for a market correction from that sector, while talking about a shift in leadership from growth- to value-oriented stocks. The U.S. economic picture remained slightly out of focus during the first half of the month, with many of the headline numbers showing improvements but missing analyst expectations.

REUTERS/Baz Ratner

On the equity side investors appeared to prefer domestic over international issues, pushing the domestic equity CEFs macro-group (+1.62%) to the top of the leaders’ board for the first month in three, followed closely by its mixed-asset (+1.45%) and world equity (+0.36%) CEF cohorts. Despite slight declines in crude oil prices during the month, Natural Resources CEFs (+4.11%) and Energy MLP CEFs (+3.59%) rose to the head of the CEFs universe for April.

After the ten-year Treasury yield hit a closing high of 2.82% for the month on April 4 on investors’ fears that the Federal Reserve would raise interest rates sooner than expected, Fed Chair Janet Yellen calmed the markets by reiterating that the central bank would maintain “extraordinary economic support for some time to come.” This, along with a slight flight to safety because of increased tensions in Ukraine, pushed Treasury prices higher and yields lower.

Despite the FOMC’s decision to reduce its monthly bond purchases by $10 billion to $45 billion in May—signaling its continued vote of confidence in the economy, fixed income investors continued their search for yield and looked for opportunities in select sectors of the market, pushing municipal bond CEFs (+2.22%) to the head of the fixed income universe. Investors also continued to consider the relatively attractive yields seen in the global market, pushing world bond CEFs (+1.15%) above their domestic bond CEFs (+0.70%) counterparts.

Despite some flight to safety, investors remained hungry for yield, and Corporate Debt BBB-Rated CEFs (Leveraged) (+1.28%, March’s group laggard) jumped to the head of the domestic taxable fixed income macro-group, while Loan Participation CEFs (+0.12%) was the relative laggard. None of the classifications in the taxable or tax-exempt fixed income CEFs universe suffered negative returns for April.

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