For the month, only 27% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 30% of equity CEFs and 25% of fixed income CEFs chalking up returns in the plus column. For the second month in a row, Lipper’s domestic equity CEFs (-1.29%) macro-group mitigated losses better than or outpaced its two equity-based brethren: mixed-assets CEFs (-3.48%) and world equity CEFs (-4.76%). Given the rapid rise in crude oil prices, it wasn’t surprising to see the Energy MLP CEFs classification (+7.63%) for the first month in three outperform all other equity classifications, followed by Natural Resources CEFs (+6.92%) and Real Estate CEFs (-0.35%).
For the first month in three, the domestic CEFs macro-group chalked up the strongest relative returns in the fixed income universe, posting a 0.91% decline on average, followed by world income CEFs (-0.95%) and municipal bond CEFs (-3.79%)—their worst monthly returns since March 2020. Fixed income investors focused their attentions on imminent interest rate hikes and inflation during the month. They pushed Loan Participation CEFs (+0.38%) to the top of the domestic taxable fixed income leaderboard for the first month in four, followed by U.S. Mortgage CEFs (-0.65%) and General Bond CEFs (-0.86%).
For January, the median discount of all CEFs widened a whopping 256 bps to 4.59%—wider than the 12-month moving average median discount (3.06%) and its widest month-end discount since March 31, 2021. In this report, we highlight January 2022 CEF performance trends, premiums and discounts, and corporate actions and events.
Highlights
- For the second month in three, equity CEFs on average witnessed negative returns, declining 2.40% on a NAV basis for January, while for the first month three, fixed income CEFs posted returns in the red (-2.04%).
- Only 20% of all CEFs traded at a premium to their NAV at month end, with 27% of equity CEFs and 14% of fixed income CEFs trading in premium territory. The national municipal debt CEFs macro-classification witnessed the largest widening of discounts for the month among Lipper’s CEF macro-groups—a whopping 419 basis points (bps) to a 5.48% median discount.
- Energy MLP CEFs (+7.63%) for the first month in three posted the strongest one-month returns of the equity classifications in the CEF universe for January.
- For the first month in four, the Loan Participation CEFs (+0.38%) classification posted the only plus-side returns in the fixed income CEF universe for January.
- For the first month in three, the municipal debt CEFs macro-group posted a negative return (-3.97% on average, its worst since March 2020), with all nine classifications in the group experiencing downside performance for January.
Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: January 2022 here.
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