March 5, 2020

The Month in Closed-End Funds: February 2020

by Tom Roseen.

For the month, only 33% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with just 8% of equity CEFs and 52% of fixed income CEFs chalking up returns in the plus column. For the second month in a row, Lipper’s mixed-asset CEFs (-4.66%) mitigated losses better than or outperformed its two equity-based brethren: world equity CEFs macro-group (-6.50%) and domestic equity CEFs (-7.68%). For the first month in nine, the Real Estate CEFs classification (-2.46%) mitigated losses better than or outperformed all other equity classifications, followed by Convertible Securities CEFs (-4.58%) and Income & Preferred Stock CEFs (-4.68%).

For the second consecutive month, municipal bond CEFs remained at the top of the leaderboard, posting a 2.12% return on average, followed by domestic taxable fixed income CEFs (-1.23%) and world income CEFs (-1.55%). On the domestic taxable fixed income side, the Corporate Debt BBB-Rated CEFs classification took the top honors, returning 0.84%, followed by U.S. Mortgage CEFs (+0.83%) and Corporate Debt BBB-Rated CEFs (Leveraged) (-0.13%).

For February, the median discount of all CEFs widened 313 basis points (bps) to 8.08%—wider than the 12-month moving average median discount (6.73%). In this report, we highlight February 2020 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the second month in a row, equity CEFs on average posted negative returns, declining 6.90% on a NAV basis for February, while for the fourth month in a row, fixed income CEFs witnessed positive returns (+0.15%).
  • Only 13% of all CEFs traded at a premium to their NAV, with 12% of equity CEFs and 13% of fixed income CEFs trading in premium territory. The world income CEFs macro-classification witnessed the largest widening of discounts for the month among Lipper’s CEF macro-groups—437 bps to 6.68%.
  • Real Estate CEFs (-2.46%) mitigated losses better than the other equity CEF classifications for the month.
  • The California Municipal CEFs classification (+2.35%) posted the strongest plus-side returns in the fixed income universe for the month.
  • For the fifth consecutive month, the municipal bond CEF (+2.12%) 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: February 2020 here.

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