The Month in Closed-End Funds: December 2022

Only 21% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black for the month, with just 12% of equity CEFs and 27% of fixed income CEFs chalking up returns in the plus column. For the first month in three, Lipper’s mixed-assets CEFs (-2.01%) macro-group outpaced or mitigated losses better than its two equity-based brethren: world equity CEFs (-2.78%) and domestic equity CEFs (-3.58%). For the first month since June 30, 2019, the Developed Markets CEFs classification (-1.11%) moved to the top of the equity leaderboard, followed by Income & Preferred Stock CEFs (-1.39%) and Sector Equity CEFs (-2.41%).

For the first month in four, the world income CEFs macro-group outpaced or mitigated losses better than the other macro-groups in the fixed income universe, posting a 0.58% gain on average, followed by domestic taxable bond CEFs (-0.26%) and municipal debt CEFs (-0.53%). For the first month in 14, investors pushed High Yield CEFs (+1.30%) to the top of the domestic taxable fixed income leaderboard, followed by U.S. Mortgage CEFs (-0.08%) and Loan Participation CEFs (-0.19%).

The average equity CEF was down 9.85% for 2022, with the domestic equity CEF macro-group (-4.71%) mitigating losses better than its mixed-assets CEF (-15.19%) and world equity CEF (-20.35%) counterparts. On the fixed income side, the average fixed income CEF is down 12.21% for the year, the with world bond CEFs macro-group declining 8.49%, followed by domestic taxable bond CEFs (-9.43%) and municipal bond CEFs (-17.43%).

The month end median discount of all CEFs widened 260 bps to 9.92%—wider than the 12-month moving average median discount (7.49%). In this report, we highlight December 2022 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

• For the first month in three, equity CEFs (-3.12% on a NAV basis) on average witnessed negative performance, while their fixed income CEF cohorts (-0.28%) posted losses for the fourth month in five.
• Only 13% of all CEFs traded at a premium to their NAV at month end, with 17% of equity CEFs and 10% of fixed income CEFs trading in premium territory.
• For the first month since June 2019, Developed Markets CEFs (-1.11%) mitigated losses better than the other classifications in the equity CEF universe for December.
• For the second month in a row, Emerging Markets Hard Currency Debt CEFs (+2.20%) posted the strongest return in the fixed income CEF universe for December.
• Equity and fixed income CEFs posted NAV-based returns of 6.39% and 3.82%, respectively for Q4.