October 6, 2022

The Month in Closed-End Funds: September 2022

by Tom Roseen.

For the month, only 6% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 6% of equity CEFs and 5% of fixed income CEFs chalking up returns in the plus column. For the second month in a row, Lipper’s mixed-assets CEFs (-6.43%) macro-group mitigated losses better than its two equity-based brethren: domestic equity CEFs (-7.44%) and world equity CEFs (-9.32%). For the first month in five, the Real Estate CEFs classification (-4.38%) moved to the top of the equity leaderboard, followed by Income & Preferred Stock CEFs (-5.54%) and Sector Equity CEFs (-6.04%).

For the first month in five, the domestic taxable bond CEFs macro-group outpaced or mitigated losses better than the other macro-groups in the fixed income universe, posting a 3.75% loss on average, followed by world income CEFs (-4.95%) and municipal debt CEFs (-7.22%). Fixed income investors turned their backs on tax-exempt and international issues. For the second consecutive month, investors kept Loan Participation CEFs (-2.69%) at the top of the domestic taxable fixed income leaderboard (and fixed income universe), followed by U.S. Mortgage CEFs (-3.04%) and General Bond CEFs (-3.35%).

For September, the median discount of all CEFs widened 308 bps to 9.80%—wider than the 12-month moving average median discount (5.79%). In this report, we highlight September 2022 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the second month in a row, equity and fixed income CEFs on average witnessed downside returns, sliding 7.63% and 5.07% on a NAV basis for September—their largest monthly declines since March 2020.
  • Only 14% of all CEFs traded at a premium to their NAV at month end, with 18% of equity CEFs and 11% of fixed income CEFs trading in premium territory. The domestic equity CEFs macro-classification witnessed the largest widening of discounts for the month among Lipper’s CEF macro-groups—522 bps to a 10.03% median discount.
  • Real Estate CEFs (-4.37%) mitigated losses better than the other classifications in the equity CEF universe for September.
  • For the second consecutive month, Loan Participation CEFs (-2.69%) remained at the top of the leaderboard in the fixed income CEF universe for September.
  • For the second month in a row, the municipal debt CEFs macro-group posted a negative return (-7.22% 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: September 2022 here.

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