The Month in Closed-End Funds: May 2023

For the month, 23% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with only 21% of equity CEFs and 24% of fixed income CEFs chalking up returns in the plus column.

Lipper’s mixed-assets CEFs (-0.71%) macro-group for the first month in three mitigated losses better than or outpaced its two equity-based brethren: domestic equity CEFs (-2.16%) and world equity CEFs (-2.48%). For the first month since August 2020, the Convertible Securities CEFs classification (+0.07%, April’s laggard) moved to the top of the equity leaderboard, followed by Income & Preferred Stock CEFs (-0.97%) and Sector Equity CEFs (-1.17%).

The world income CEFs macro-group—for the first month in five—mitigated losses better than or outpaced the other two macro-groups in the fixed income universe, posting a 0.19% loss on average, followed by domestic taxable bond CEFs (-0.46%) and municipal debt CEFs (-1.11%). Investors pushed Loan Participation CEFs (-0.08%) to the top of the domestic taxable fixed income leaderboard for the first month in three, followed by General Bond CEFs (-0.21%) and High Yield CEFs (-0.32%).

Year to date, both equity and fixed income CEFs posted plus-side returns on a NAV-basis, rising 1.06% and 2.92%, respectively.

The median discount of all CEFs widened 94 bps to 11.56% for May—wider than the 12-month moving average median discount (8.86%). Equity CEFs’ median discount widened 92 bps to 12.55%, while fixed income CEFs’ median discount widened 72 bps to 11.01%.

In this report, we highlight May 2023 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

• For the third month in four, equity CEFs (-1.95% on a NAV basis) on average witnessed downside performance while their fixed income CEF cohorts (-0.66%) posted losses for the first month in three.
• At month end, 9% of all CEFs traded at a premium to their NAV, with 10% of equity CEFs and 8% of fixed income CEFs trading in premium territory. The world equity CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—29 bps to a 14.49% median discount.
• For the first month since August 2020, Convertible Securities CEFs (+0.07%) outperformed the other classifications in the equity CEF universe for May.
• For the first month in three, Loan Participation CEFs (-0.08%) mitigated losses better than or outperformed the other classifications in the domestic taxable fixed income CEF universe.
• The world bond CEFs macro-group (-0.19%) outpaced its domestic taxable bond (-0.46%) and municipal debt (-1.11%) CEF counterparts.