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August 4, 2023

The Month in Closed-End Funds: July 2023

by Tom Roseen.

For the month, 92% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with 91% of equity CEFs and 93% of fixed income CEFs chalking up returns in the plus column. The average equity and fixed income CEF posted NAV-based returns of 2.69% and 1.03%, respectively, for July.

Lipper’s world equity CEFs macro-group (+3.69%) for the second month in a row outpaced its two equity-based brethren: mixed-assets CEFs (+2.63%) and domestic equity CEFs (+2.38%). For the first month in six, the Emerging Markets CEFs classification (+5.95%) moved to the top of the equity leaderboard, followed by Energy MLP CEFs (+5.06%) and Natural Resources CEFs (+5.00%).

Year to date, both equity and fixed income CEFs posted plus-side returns on a NAV basis, rising 7.68% and 5.74%, respectively.

The world income CEFs macro-group—for the third month in a row—outpaced or mitigated losses better than the other two macro-groups in the fixed income universe, posting a 1.73% gain on average, followed by domestic taxable bond CEFs (+1.40%) and municipal debt CEFs (+0.20%). Investors pushed High Yield (Leveraged) CEFs (+1.89%) to the top of the domestic taxable fixed income leaderboard for the first month in three, followed by Loan Participation CEFs (+1.58%) and High Yield CEFs (+1.45%).

The median discount of all CEFs narrowed 65 bps to 10.15% for July—wider than the 12-month moving average median discount (9.48%). Equity CEFs’ median discount narrowed by 51 bps to 11.41%, while fixed income CEFs’ median discount narrowed by 67 bps to 9.43%.

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

Highlights:

  • For the second consecutive month, equity CEFs (+2.69% on a NAV basis) on average chalked up plus-side performance while their fixed income CEF cohorts (+1.03%) also posted gains for the second month in a row.
  • At month end, 13% of all CEFs traded at a premium to their NAV, with 14% of equity CEFs and 12% of fixed income CEFs trading in premium territory. The world income CEFs macro-classification witnessed the largest narrowing of discounts for the month among Lipper’s CEF macro-groups—227 bps to a 6.48% median discount.
  • For the first month in six, Emerging Markets CEFs (+5.95%) outperformed the other classifications in the equity CEF universe for July.
  • For the first month in three, High Yield (Leveraged) CEFs (+1.89%) outperformed or mitigated losses better than the other classifications in the domestic taxable fixed income CEF universe.
  • For the third month running, the world income CEFs macro-group (+1.73%) outpaced its domestic taxable bond (+1.40%) and municipal debt (+0.20%) CEF counterparts.

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

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