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March 7, 2023

The Month in Closed-End Funds: February 2023

by Tom Roseen.

For the month, only 20% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with just 9% of equity CEFs and 28% of fixed income CEFs chalking up returns in the plus column. For the second month in three, Lipper’s mixed-assets CEFs (-1.81%) macro-group outpaced or mitigated losses better than its two equity-based brethren: domestic equity CEFs (-2.69%) and world equity CEFs (-3.48%). Also, for the second month in three, the Income & Preferred Stock CEFs classification (-1.46%) moved to the top of the equity leaderboard, followed by Real Estate CEFs (-1.85%) and Options Arbitrage/Options Strategies CEFs (-1.93%).

For the first month in four, the domestic taxable bond CEFs macro-group outpaced or mitigated losses better than the other macro-groups in the fixed income universe, posting a 0.61% loss on average, followed by world income CEFs (-1.23%) and municipal debt CEFs (-3.78%, their largest monthly loss since September 30, 2022). For the first month in five, investors pushed Loan Participation CEFs (+0.22%) to the top of the domestic taxable fixed income leaderboard, followed by General Bond CEFs (-0.33%) and High Yield CEFs (-0.34%).

For the year-to-date period ended February 28, 2023, both equity and fixed income CEFs posted plus-side returns on a NAV-basis, rising 2.68% and 2.18%, respectively.

For February, the median discount of all CEFs widened 25 bps to 8.60%—wider than the 12-month moving average median discount (7.99%). Equity CEFs’ median discount widened 104 bps to 9.65%, while fixed income CEFs’ median discount widened one bp to 8.19%.

In this report, we highlight February 2023 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the second month in three, equity CEFs (-2.68% on a NAV basis) on average witnessed negative performance, while their fixed income CEF cohorts (-1.79%) posted losses, also for the second month in three.
  • At month end, 17% of all CEFs traded at a premium to their NAV, with 21% of equity CEFs and 14% of fixed income CEFs trading in premium territory. The high yield CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—93 bps to a 5.33% median discount.
  • For the second month in three, Income & Preferred Stock CEFs (-1.46%) mitigated losses better than or outperformed the other classifications in the equity CEF universe for February.
  • For the first month in five, Loan Participation CEFs (+0.22%) outperformed the other classifications in the fixed income CEF universe for February.
  • The municipal debt CEFs macro-group (-3.78%) significantly underperformed its world bond (-1.23%) and domestic taxable bond (-0.61%) CEF counterparts.

Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: February 2023 here.

Refinitiv Lipper delivers data on more than 330,000 collective investments in 113 countries. Find out more.

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