The Month in Closed-End Funds: August 2021

For the month, 70% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 86% of equity CEFs and 59% of fixed income CEFs chalking up returns in the plus column. For the first month in eight, Lipper’s world equity CEFs (+2.03%) macro-group outpaced its two equity-based brethren: domestic equity CEFs (+1.40%) and mixed-assets CEFs (+0.90%). The Developed Markets CEFs classification (+2.85%) for the first month in 22 outperformed all other equity classifications, followed by Utility CEFs (+2.30%) and Diversified Equity CEFs (+2.15%).

For the first month in three, the world income CEFs macro-group posted the strongest returns in the fixed income universe, posting a 1.43% return on average, followed by domestic taxable fixed income CEFs (+0.74%) and municipal bond CEFs (-0.62%). Fixed income investors became slightly more risk seeking during the month. They pushed High Yield CEFs (Leveraged) (+0.89%) to the top of the domestic taxable fixed income leaderboard for the first month in six, followed by Loan Participation CEFs (+0.84%) and General Bond CEFs (+0.79%).

For August, the median discount of all CEFs narrowed 40 bps to 1.58%—narrower than the 12-month moving average median discount (5.33%). In this report, we highlight August 2021 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights

• For the tenth month running, equity CEFs on average posted positive returns, rising 1.43% on a NAV basis for August, while for the sixth consecutive month fixed income CEFs posted plus-side returns (+0.29%).
• Thirty-seven percent of all CEFs traded at a premium to their NAV, with 32% of equity CEFs and 41% of fixed income CEFs trading in premium territory. The national municipal CEFs macro-classification witnessed the second largest narrowing of discounts for the month among Lipper’s CEF macro-groups—117 basis points (bps) to a 0.44% medium premium.
• Developed Markets CEFs (+2.85%) for the first month in 22 posted the strongest one-month returns of the equity classifications in the CEF universe for August.
• For the first month in six, the High Yield CEFs (Leveraged) (+0.89%) classification posted the strongest plus-side returns in the domestic taxable fixed income CEF macro-group for August.
• The municipal bond CEF macro-group (-0.62%) posted a loss for the first month in six, with all nine classifications experiencing negative returns.