September 4, 2020

The Month in Closed-End Funds: August 2020

by Tom Roseen.

For the month, 70% of all closed-end fund (CEFs) posted net asset value (NAV)-based returns in the black, with 86% of equity CEFs and 58% of fixed income CEFs chalking up returns in the plus column. For the fourth month in a row, Lipper’s world equity CEFs macro-group (+3.86%) outpaced its two equity-based brethren: mixed-assets CEFs (+3.61%) and domestic equity CEFs (+2.10%). For the second consecutive month, the Convertible Securities CEFs classification (+5.76%) outperformed all other equity classifications, followed by Developed Markets CEFs (+5.21%) and Diversified Equity CEFs (+4.28%). Utility CEFs (+0.05%) was the relative laggard of the equity universe.

Domestic taxable fixed income CEFs moved to the top of the charts for the first month in four, posting a 1.63% return on average, followed by world income CEFs (+1.51%) and municipal bond CEFs (-0.53%). Investors continued their search for yield during the month and appeared to anticipate a rise in inflation, pushing Loan Participation CEFs (+1.89%) to the top of the domestic taxable fixed income leaderboard for the first month in nine, followed by U.S. Mortgage CEFs (+1.82%) and High Yield CEFs (+1.76%). Corporate Debt BBB-Rated CEFs (+0.46%) posted the only negative returns of the group.

The median discount of all CEFs for August narrowed 15 basis points (bps) to 8.56%—wider than the 12-month moving average median discount (7.73%). In this report, we highlight August 2020 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights

  • For the fifth month in a row, equity CEFs on average posted positive returns, rising 2.71% on a NAV basis for August, while also for the fifth month running, fixed income CEFs witnessed returns in the black (+0.73%).
  • Only 15% of all CEFs traded at a premium to their NAV, with 15% of equity CEFs and 15% of fixed income CEFs trading in premium territory. The high yield bond CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—222 bps to 7.48%.
  • Convertible Securities Funds (+5.76%) posted the strongest one-month return in the CEF universe for August for the second consecutive month.
  • The World Equity CEFs (+3.86%) macro-group posted the strongest plus-side returns in the CEF universe for August.
  • For the first month in four, the municipal bond CEFs (-0.53%) macro-group posted returns in the red, with all nine classifications in the group posting losses for August.

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

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