June 4, 2021

The Month in Closed-End Funds: May 2021

by Tom Roseen.

For the month, 92% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with 86% of equity CEFs and 97% of fixed income CEFs chalking up returns in the plus column. For the fifth consecutive month, Lipper’s domestic equity CEFs macro-group (+2.19%) outpaced its two equity-based brethren: world equity CEFs (+2.13%) and mixed-assets CEFs (+0.66%). The Energy MLP CEFs classification (+6.74%) for the second month in a row outperformed all other equity classifications, followed by Natural Resources CEFs (+4.34%) and Developed Markets CEFs (+3.29%).

For the second consecutive month, the world income CEFs macro-group posted the strongest returns in the fixed income universe, posting a 1.36% return on average, followed by municipal bond CEFs (+0.91%) and domestic taxable fixed income CEFs (+0.76%). Fixed income investors continued their search for yield. They pushed Corporate Debt BBB-Rated CEFs (Leveraged) (+0.96%) to the top of the domestic taxable fixed income leaderboard for the second month in a row, followed by Loan Participation CEFs (+0.85%) and High Yield CEFs (+0.79%).

For May, the median discount of all CEFs narrowed 121 bps to 2.80%—narrower than the 12-month moving average median discount (7.06%). In this report, we highlight May 2021 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights

  • For the seventh month in a row, equity closed-end funds (CEFs) on average posted positive returns, rising 1.90% on a NAV basis for May, while for the third month running fixed income CEFs posted plus-side returns (+0.86%).
  • Thirty percent of all CEFs traded at a premium to their NAV, with 30% of equity CEFs and 31% of fixed income CEFs trading in premium territory. The domestic equity CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—204 basis points (bps) to 1.78%.
  • Energy MLP CEFs (+6.74%) for the second month in row posted the strongest one-month returns of the equity classifications in the CEF universe for May.
  • For the second consecutive month, the Emerging Markets Hard Currency Debt CEFs (+1.89%) classification posted the strongest plus-side returns in the taxable fixed income CEF universe for May.
  • The municipal bond CEF macro-group (+0.91%) posted returns in the black for the third consecutive month, with all nine classifications chalking up positive returns.

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

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