July 8, 2022

The Month in Closed-End Funds: June 2022

by Tom Roseen.

For the month, only 5% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 10% of equity CEFs and just 2% of fixed income CEFs chalking up returns in the plus column. For the first month in seven, Lipper’s mixed-assets CEFs (-6.38%) macro-group mitigated losses better than its two equity-based brethren: domestic equity CEFs (-6.56%) and world equity CEFs (-7.58%). Despite concerns of a global recession and rising interest rates, for the second month in three the Real Estate CEFs classification (-1.65%) moved to the top of the equity leaderboard, followed by Emerging Markets CEFs (-5.14%) and Income & Preferred Stock CEFs (-6.17%).

For the second month in a row, the municipal debt CEFs macro-group outpaced or mitigated losses better than the other macro-groups in the fixed income universe, posting a 4.21% decline on average, followed by domestic taxable bond CEFs (-4.42%) and world income CEFs (-7.12%). Fixed income investors appeared to move toward quality during the month, shunning lower quality and foreign issues. For the first month in seven, investors pushed U.S. Mortgage CEFs (-1.89%) to the top of the domestic taxable fixed income leaderboard, followed by Corporate Debt BBB-Rated CEFs (-3.04%) and Loan Participation CEFs (-3.45%, May’s laggard).

For May, the median discount of all CEFs narrowed 31 bps to 7.16%—wider than the 12-month moving average median discount (4.38%). In this report, we highlight June 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, falling 6.73% on a NAV basis for June, while for the sixth consecutive month, fixed income CEFs posted returns in the red (-4.54%).
  • Fixed income and equity CEFs posted their largest monthly NAV-based declines since March 2020.
  • Only 19% of all CEFs traded at a premium to their NAV at month end, with 21% of equity CEFs and 17% of fixed income CEFs trading in premium territory. The taxable bond CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—98 basis points (bps) to a 7.16% median discount.
  • Real Estate CEFs (-1.65%) mitigated losses better than the other classifications in the equity CEF universe for June.
  • For the second month in three, the U.S. Mortgage CEFs (-1.89%) classification rose to the top of the leaderboard in the fixed income CEF universe for June.
  • For the fifth month in six, the municipal debt CEFs macro-group posted a negative return (-4.21%, 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: June 2022 here.

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