July 7, 2020

The Month in Closed-End Funds: June 2020

by Tom Roseen.

For the month, 85% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with 69% of equity CEFs and 97% of fixed income CEFs chalking up returns in the plus column. For the second month in a row, Lipper’s world equity CEFs macro-group (+4.00%) outpaced its two equity-based brethren: mixed-assets CEFs (+1.71%) and domestic equity CEFs (+0.20%). For the first month in eight, the Emerging Markets CEFs classification (+5.64%) outperformed all other equity classifications, followed by Convertible Securities CEFs (+4.11%) and Developed Markets CEFs (+3.81%). Energy MLP CEFs (-5.87%, May’s leader) posted the worst returns of the equity universe.

For the second month in a row, world income CEFs remained at the top of the charts, posting a 3.63% return on average, followed by domestic taxable fixed income CEFs (+2.63%) and municipal bond CEFs (+2.40%). Investors continued their search for yield during the month, pushing U.S. Mortgage CEFs (+4.29%) to the top of the domestic taxable fixed income leaderboard for the month, followed by General Bond CEFs (+3.00%) and Loan Participation CEFs (+2.50%).

For June, the median discount of all CEFs widened 31 bps to 9.41%—wider than the 12-month moving average median discount (7.33%). In this report, we highlight June 2020 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the third month in a row, equity CEFs on average posted positive returns, rising 1.18% on a NAV basis for June, while also for the third month running fixed income CEFs witnessed returns in the black (+2.61%).
  • Only 14% of all CEFs traded at a premium to their NAV, with 15% 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—225 basis points (bps) to 5.92%.
  • For Q2, equity CEFs (+18.47%) and fixed income CEFs (+8.48%) posted their strongest quarterly returns since Q2 2009 and Q3 2009, respectively.
  • Emerging Markets CEFs (+5.64%) and Emerging Markets Hard Currency Debt CEFs (+5.17%) posted the strongest plus-side returns in the CEF universe for June.
  • For the second consecutive month, the municipal bond CEFs (+2.40%) macro-group posted returns in the black, with all nine classifications in the group posting plus-side returns for June.

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

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