April 6, 2021

The Month in Closed-End Funds: March 2021

by Tom Roseen.

For the month, 80% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 84% of equity CEFs and 78% of fixed income CEFs chalking up returns in the plus column. For the third consecutive month, Lipper’s domestic equity CEFs macro-group (+3.75%) outpaced its two equity-based brethren: world equity CEFs (+1.73%) and mixed-assets CEFs (+0.76%). The Utility CEFs classification (+8.33%, February’s laggard) for the first month in 15 outperformed all other equity classifications, followed by Energy MLP CEFs (+7.47%) and Natural Resources CEFs (+4.99%).

For the second month in three, the municipal bond CEFs macro-group jumped to the top of the charts, posting a 1.00% return on average, followed by domestic taxable fixed income CEFs (+0.23%) and world income CEFs (-0.87%). Fixed income investors were in search of yield, continuing to rotate out of some of the quality issues. They pushed High Yield CEFs (+0.67%) to the top of the domestic taxable fixed income leaderboard for the first month in five, followed by High Yield CEFs (Leveraged) (+0.49%) and Loan Participation CEFs (+0.32%).

For March, the median discount of all CEFs narrowed 97 bps to 4.63%—narrower than the 12-month moving average median discount (8.03%). In this report, we highlight March 2021 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 2.77% on a NAV basis for March, while for the eleventh month in 12 fixed income CEFs posted plus-side returns (+0.45%).
  • Twenty-four percent of all CEFs traded at a premium to their NAV, with 23% of equity CEFs and 25% of fixed income CEFs trading in premium territory. The taxable bond CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—229 basis points (bps) to 2.87%.
  • Utility CEFs (+8.33%) for the first month in 15 posted the strongest one-month returns of the equity classifications in the CEF universe for March.
  • For the first month in five, the High Yield CEFs (+0.67%) classification posted the strongest plus-side returns in the taxable fixed income CEF universe for March.
  • The municipal bond CEF macro-group (+1.00%) posted returns in the black for the fourth month in five, with all nine classifications chalking up positive returns.

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

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