February 6, 2020

The Month in Closed-End Funds: January 2020

by Tom Roseen.

For the month, 72% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with only 46% of equity CEFs and 92% of fixed income CEFs chalking up returns in the plus column. For the first month in five, Lipper’s mixed-asset CEFs (+0.66%) outperformed its two equity-based brethren: world equity CEFs macro-group (-1.57%) and domestic equity CEFs (-1.59%). For the first month in five, the Utility CEFs classification (+2.34%) outperformed all other equity classifications, followed by Convertible Securities CEFs (+1.40%) and Real Estate CEFs (+0.64%, December’s laggard).

For the first month in five, municipal bond CEFs jumped to the top of the leaderboard, posting a 2.62% return on average, followed by domestic taxable fixed income CEFs (+0.77%) and world income CEFs (+0.55%). For the fourth month in a row, the municipal debt CEFs macro-group posted a plus-side return (+2.62%) on average, with all nine classifications in the group experiencing plus-side returns for January. On the domestic taxable fixed income side, the Corporate Debt BBB-Rated CEFs classification took the top honors, returning 2.09%.

For January, the median discount of all CEFs narrowed 83 bps to 4.95%—still narrower than the 12-month moving average median discount (6.70%). In this report, we highlight January 2020 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the first month in five, equity CEFs on average posted negative returns, declining 1.17% on a NAV basis for January, while for the third month in a row, fixed income CEFs witnessed positive returns (+1.53%).
  • Only 23% of all CEFs traded at a premium to their NAV, with 26% of equity CEFs and 21% of fixed income CEFs trading in premium territory. The world income CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—370 basis points (bps) to 2.31%.
  • Utility CEFs (+2.34%) posted the strongest positive returns of all equity CEF classifications for the month.
  • The California Municipal CEFs classification (+2.91%) posted the strongest plus-side returns in the fixed income universe for the month.
  • For the fourth consecutive month, the municipal bond CEF (+2.62%) macro-group posted plus-side returns, with all nine classifications in the group posting returns in the black.

Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: January 2020 here.

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