June 7, 2022

The Month in Closed-End Funds: May 2022

by Tom Roseen.

For the month, 52% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 40% of equity CEFs and 62% of fixed income CEFs chalking up returns in the plus column. For the sixth month in a row, Lipper’s domestic equity CEFs (+1.16%) macro-group outshined its two equity-based brethren: world equity CEFs (+1.11%) and mixed-assets CEFs (-1.02%). Given the continued rise in crude oil prices and select commodities, it wasn’t surprising to see the Natural Resources CEFs classification (+8.98%) move to the top of the equity leaderboard for the month, followed by Energy MLP CEFs (+7.12%) and Utility CEFs classification (+3.44%).

For the first month in three, the municipal debt CEFs macro-group outpaced the other macro-groups in the fixed income universe, posting a 2.00% return on average, followed by world income CEFs (-0.31%) and domestic taxable bond CEFs (-1.90%). Fixed income investors focused on attractive opportunities in the municipal debt market and a slight drop in Treasury yields during the month. For the first month in 11, investors pushed Corporate Debt BBB-Rated CEFs (+0.27%, April’s laggard) to the top of the domestic taxable fixed income leaderboard, followed by Corporate Debt BBB-Rated CEFs (Leveraged) (-0.07%) and U.S. Mortgage CEFs (-0.73%).

For May, the median discount of all CEFs narrowed 52 basis points (bps) to 7.48%—wider than the 12-month moving average median discount (3.99%). In this report, we highlight May 2022 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 0.73% on a NAV basis for May, while for the fifth consecutive month, fixed income CEFs posted returns in the red (-0.40%).
  • Only 20% of all CEFs traded at a premium to their NAV at month end, with 24% of equity CEFs and 16% of fixed income CEFs trading in premium territory. The single state municipal debt CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—234 bps to a 6.27% median discount.
  • Natural Resources CEFs (+8.98%) outpaced the other classifications in the equity CEF universe for May.
  • For the first month in 11, the California Municipal Debt CEFs (+2.28%) classification outpaced the other classifications in the fixed income CEF universe for May.
  • For the first month in five, the municipal debt CEFs macro-group posted a plus-side return (+2.00%, on average), with all nine classifications in the group experiencing positive performance for the month.

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

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