For the month, only 18% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 35% of equity CEFs and 5% of fixed income CEFs chalking up returns in the plus column. For the third month in a row, Lipper’s domestic equity CEFs (+0.27%) macro-group mitigated losses better than or outpaced its two equity-based brethren: mixed-assets CEFs (-1.96%) and world equity CEFs (-3.42%). Given the continued rise in crude oil prices, it wasn’t surprising to see the Energy MLP CEFs classification (+5.17%) for the second month in row outperform all other equity classifications, followed by Natural Resources CEFs (+3.99%) and Sector Equity CEFs (+0.26%).
For the first month in three, the municipal bond CEFs macro-group chalked up the strongest relative returns in the fixed income universe, posting a 0.97% decline on average, followed by domestic taxable bond CEFs (-1.09%) and world income CEFs (-3.73%). Fixed income investors focused their attention on imminent interest rate hikes and inflation during the month. They kept Loan Participation CEFs (-0.50%) at the top of the domestic taxable fixed income leaderboard for the second consecutive month, followed by General Bond CEFs (-1.04%) and U.S. Mortgage CEFs (-1.05%).
For February, the median discount of all CEFs widened 180 basis points (bps) to 6.40%—wider than the 12-month moving average median discount (3.13%) and its widest month-end discount since January 29, 2021. In this report, we highlight February 2022 CEF performance trends, premiums and discounts, and corporate actions and events.
Highlights
- For the second month in a row, equity CEFs on average witnessed negative returns, declining 0.89% on a NAV basis for February, while also for the second consecutive month, fixed income CEFs posted returns in the red (-1.23%).
- Only 17% of all CEFs traded at a premium to their NAV at month end, with 23% of equity CEFs and 11% of fixed income CEFs trading in premium territory. The high yield bond CEFs macro-classification witnessed the largest widening of discounts for the month among Lipper’s CEF macro-groups—266 bps to a 7.09% median discount.
- Energy MLP CEFs (+5.17%) for the second month running posted the strongest one-month returns of the equity classifications in the CEF universe for February.
- For the second consecutive month, the Loan Participation CEFs (-0.50%) classification outpaced or mitigated losses better than the other classifications in the fixed income CEF universe for February.
- For the second month in a row, the municipal debt CEFs macro-group posted a negative return (-0.97%, on average), with all nine classifications in the group experiencing downside performance for February.
Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: February 2022 here.
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