Both U.S. Equity and Fixed Income Closed-End Funds Post Plus-Side Returns for the First Month in Five
Despite experiencing a market rollercoaster ride in April, for the second month in three equity closed-end funds (CEFs) posted a NAV-based return (+2.07% on average) and market-based return (+2.20%) in the black, while fixed income CEFs just managed to stay in positive territory, returning 0.06% on a NAV basis, but posted a more respectable plus-side return of 0.89% on a market basis.
For the month 55% of all CEFs posted NAV-basis returns in the black, with 74% of equity CEFs and only 41% of fixed income CEFs chalking up returns in the plus column. Concerns over the possibility of the Fed raising interest rates in June weighed on interest rate-sensitive securities, sending Lipper’s mixed-asset CEFs macro-group (+0.50%) to the bottom of the equity CEFs universe for the month, while central bank intervention and buying opportunities favored the world equity CEFs group (+3.56%), propelling it to the top of the charts. Domestic equity CEFs (+1.83%) was sandwiched between the other two broad-based groups for April.
The FOMC statement released on April 29 suggested the Fed is willing to remain patient for the near-term with regard to interest-rate changes in order to evaluate the impact the winter months and a rising dollar may have had on economic growth. But, it did indicate that households’ real income had risen strongly. Not without reason, some investors still believe the Fed could raise interest rates as early as June. These offsetting views led Treasury yields to rise at the long end of the curve, while at the shortest end of the curve the one-month rate declined 5 bps to 0.00%. The Treasury curve rose at all maturities greater than one year. The ten-year yield rose 11 bps to 2.05% at month-end.
In contrast to March when municipal bond CEFs (-0.89% for April) was the only Lipper fixed income macro-classification with all of its classifications experiencing returns in the black, none of the classifications experienced plus-side returns for April. Rising to the top of the charts for the month world income CEFs (+2.60%) posted the strongest return, followed at a distance by domestic taxable bond CEFs (+0.93%).
For April the median discount of all CEFs narrowed 43 bps to 8.24%—better than the 12-month moving average discount (8.56%). Equity CEFs’ median discount widened 16 bps to 9.47%, while fixed income CEFs’ median discount narrowed 89 bps to 7.44%.
To read the complete Month in Closed-End Funds: April 2015 FundMarket Insight Report, which includes the month’s closed-end fund corporate events, please click here.
