March 4, 2021

The Month in Closed-End Funds: February 2021

by Tom Roseen.

For the month, 62% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 82% of equity CEFs and just 47% of fixed income CEFs chalking up returns in the plus column. For the second consecutive month, Lipper’s domestic equity CEFs macro-group (+2.75%) outpaced its two equity-based brethren: world equity CEFs (+2.25%) and mixed-assets CEFs (+1.54%). The Energy MLP CEFs classification (+6.91%) for the second month in a row outperformed all other equity classifications, followed by Natural Resources CEFs (+6.89%) and Diversified Equity CEFs (+4.24%).

For the first month in four, domestic taxable fixed income CEFs jumped to the top of the charts, posting a 0.76% return on average, followed by world income CEFs (-0.45%) and municipal bond CEFs (-2.22%). Fixed income investors were a bit more aggressive during the month, rotating out of some of the quality issues. They pushed High Yield CEFs (Leveraged) (+1.02%) to the top of the domestic taxable fixed income leaderboard for the first month in three, followed by Loan Participation CEFs (+0.94%) and High Yield CEFs (+0.84%).

For February, the median discount of all CEFs narrowed 169 basis points (bps) to 5.60%—narrower than the 12-month moving average median discount (8.46%). In this report, we highlight February 2021 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 2.42% on a NAV basis for February, while for the first month in 11 fixed income CEFs witnessed losses (-0.52%).
  • Nineteen percent of all CEFs traded at a premium to their NAV, with 18% of equity CEFs and 20% of fixed income CEFs trading in premium territory. The equity CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—202 bps to 8.11%.
  • Energy MLP CEFs (+6.91%) for the second month in a row posted the strongest one-month returns of the equity classifications in the CEF universe for February.
  • For the first month in seven, the High Yield CEFs (Leveraged) (+1.02%) classification posted the strongest plus-side returns in the fixed income CEF universe for February.
  • The municipal bond CEF macro-group (-2.22%) posted losses for the first month in four, with all nine classifications posting negative returns.

Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: February 2021 here.

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