May 5, 2022

The Month in Closed-End Funds: April 2022

by Tom Roseen.

For the month, only 9% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 11% of equity CEFs and just 8% of fixed income CEFs chalking up returns in the plus column. For the fifth month in a row, Lipper’s domestic equity CEFs (-4.00%) macro-group mitigated losses better than its two equity-based brethren: mixed-assets CEFs (-5.07%) and world equity CEFs (-7.27%). Given REITs historical inflationary benefits and the continued rise in crude oil prices and select commodities, it wasn’t surprising to see the Real Estate CEFs classification (-0.14%) move to the top of the equity leaderboard for the month, followed by Energy MLP CEFs (-3.14%) and Natural Resources CEFs classification (-3.31%).

For the first month in three, the domestic taxable bond CEFs macro-group mitigated losses better than or outperformed the other macro-groups in the fixed income universe, posting a 1.98% decline on average, followed by world income CEFs (-3.39%) and municipal debt CEFs (-4.99%). Fixed income investors focused their attentions on imminent interest rate hikes and inflation during the month. Once again, they kept Loan Participation CEFs (-0.34%) at the top of the domestic taxable fixed income leaderboard for the fourth consecutive month, followed by U.S. Mortgage CEFs (-1.27%) and General Bond CEFs (-1.98%).

For April, the median discount of all CEFs widened 169 basis points (bps) to 7.99%—wider than the 12-month moving average median discount (3.60%). In this report, we highlight April 2022 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights

  • For the third month in four, equity CEFs on average witnessed negative returns, sliding 4.86% on a NAV basis for April, while for the fourth consecutive month, fixed income CEFs posted returns in the red (-5.53%)—collectively their worst monthly performance since March 2020.
  • Only 18% of all CEFs traded at a premium to their NAV at month end, with 23% 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—213 bps to an 8.08% median discount.
  • Real Estate CEFs (-0.14%) mitigated losses better than the other classifications in the equity CEF universe for April.
  • For the fourth consecutive month, the Loan Participation CEFs (-0.34%) classification outpaced the other classifications in the fixed income CEF universe for April.
  • For the fourth month in a row, the municipal debt CEFs macro-group posted a negative return (-4.99%, on average), with all nine classifications in the group experiencing downside performance for the month.

Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: April 2022 here.

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