Tom Roseen
January 7, 2022

The Month in Closed-End Funds: December 2021

by Tom Roseen.

For the month, 90% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 94% of equity CEFs and 88% of fixed income CEFs chalking up returns in the plus column. For the second month in three, Lipper’s domestic equity CEFs (+3.76%) macro-group outpaced its two equity-based brethren: world equity CEFs (+3.64%) and mixed-assets CEFs (+2.09%). The Utility CEFs classification (+7.46%) for the first month in nine outperformed all other equity classifications, followed by Developed Market CEFs (+5.26%) and Diversified Equity CEFs (+4.51%).

For the first month in four, the world income CEFs macro-group chalked up the strongest returns in the fixed income universe, posting a 1.87% return on average, followed by domestic taxable fixed income CEFs (+1.03%) and municipal bond CEFs (+0.24%). Fixed income investors became more risk seeking during the month. They pushed High Yield CEFs (Leveraged) (+1.95%) to the top of the domestic taxable fixed income leaderboard for the first month in four, followed by High Yield CEFs (+1.48%) and General Bond CEFs (+1.05%).

For December, the median discount of all CEFs narrowed 37 basis points (bps) to 2.03%—still narrower than the 12-month moving average median discount (3.29%). In this report, we highlight December 2021 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights

  • For the second month in three, equity CEFs on average witnessed positive returns, rising 3.41% on a NAV basis for December, while for the second month in a row fixed income CEFs posted returns in the black (+0.79%).
  • Thirty-five percent of all CEFs traded at a premium to their NAV, with 33% of equity CEFs and 36% of fixed income CEFs trading in premium territory. The world income CEFs macro-classification witnessed the largest widening of discounts for the month among Lipper’s CEF macro-groups—136 bps to a 2.30% median discount.
  • Utility CEFs (+7.46%) for the first month in nine posted the strongest one-month returns of the equity classifications in the CEF universe for December.
  • For the first month in four, the Emerging Markets Hard Currency Debt CEFs (+2.19%) classification posted the strongest plus-side returns in the fixed income CEF universe for December.
  • For 2021, the average equity CEF posted an eye popping 18.56% return, while the average fixed income CEF returned 5.68% for the year.

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

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