August 6, 2020

The Month in Closed-End Funds: July 2020

by Tom Roseen.

For the month, 92% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 84% of equity CEFs and 98% 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 (+5.08%) outpaced its two equity-based brethren: mixed-assets CEFs (+4.50%) and domestic equity CEFs (+2.60%). For the first month in 17, the Convertible Securities CEFs classification (+7.39%) outperformed all other equity classifications, followed by Emerging Markets CEFs (+6.24%, June’s leader) and Utility CEFs (+6.07%). For the second month in a row, Energy MLP CEFs (-0.72%) posted the worst returns of the equity universe.

For the third month in a row, world income CEFs remained at the top of the charts, posting a 3.05% return on average, followed by domestic taxable fixed income CEFs (+2.93%) and municipal bond CEFs (+2.63%). Investors continued their search for yield during the month, pushing High Yield CEFs (Leveraged) (+4.18%) to the top of the domestic taxable fixed income leaderboard for the first month in 33, followed by Corporate Debt BBB-Rated CEFs (Leveraged) (+3.94%) and High Yield CEFs (+3.16%).

For July, the median discount of all CEFs narrowed 70 basis points (bps) to 8.72%—wider than the 12-month moving average median discount (7.58%). In this report, we highlight July 2020 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights

  • For the fourth month in a row, equity CEFs on average posted positive returns, rising 3.42% on a NAV basis for July, while also for the fourth month running, fixed income CEFs witnessed returns in the black (+2.81%).
  • Only 15% of all CEFs traded at a premium to their NAV, with 16% of equity CEFs and 15% of fixed income CEFs trading in premium territory. The single states municipal bond CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—205 bps to 8.55%.
  • Convertible Securities Funds (+7.39%) posted the strongest one-month return in the CEF universe for July.
  • The World Equity CEFs (+5.08%) and World Income CEFs (+3.05%) macro-groups posted the strongest plus-side returns in the CEF universe for July.
  • For the third consecutive month, the municipal bond CEFs (+2.63%) macro-group posted returns in the black, with all nine classifications in the group posting plus-side returns for July.

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

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