May 6, 2020

The Month in Closed-End Funds: April 2020

by Tom Roseen.

For the month, 70% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with 91% of equity CEFs and only 54% of fixed income CEFs chalking up returns in the plus column. For the first month in seven, Lipper’s domestic equity CEFs (+13.74%) outpaced its two equity-based brethren: world equity CEFs macro-group (+9.88%) and mixed-assets CEFs (+9.49%). For the first month in four, the Energy MLP CEFs classification (+43.67%, March’s laggard [-63.74%]) outperformed all other equity classifications, followed by Natural Resources CEFs (+24.17%) and Sector Equity CEFs (+11.85%). Real Estate CEFs (+2.77%, March’s leader) was the relative laggard of the equity universe.

For the first month in four, domestic taxable bond CEFs moved to the top of the leaderboard, posting a 3.50% return on average, followed by world income CEFs (+3.22%) and municipal debt CEFs (-3.08%). Investors became slightly more risk seeking during the month, pushing Corporate Debt BBB-Rated CEFs (Leveraged) (+5.37%) to the top of the leaderboard for the month.

For April, the median discount of all CEFs narrowed 42 bps to 9.36%—wider than the 12-month moving average median discount (7.04%). In this report, we highlight April 2020 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the first month in four, equity CEFs on average posted positive returns, rising 12.23% on a NAV basis for March (its strongest one-month return since April 30, 2009), while for the fifth month in six, fixed income CEFs witnessed returns in the black (+0.72%).
  • Only 14% of all CEFs traded at a premium to their NAV, with 16% of equity CEFs and 12% 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—277 basis points (bps) to 7.50%.
  • Real Estate CEFs (+2.77%) was the relative laggard in the equity CEF universe for the month.
  • Energy MLP CEFs (+43.67%, March’s laggard) and Natural Resources CEFs (+24.17) posted the strongest plus-side returns in the CEF universe.
  • For the second month in a row, the municipal bond CEFs (-3.08%) macro-group posted returns in the red, with all nine classifications in the group, once again, posting losses for April.

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

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