January 4, 2019

The Month in Closed-End Funds: December 2018

by Tom Roseen.

Gary A. Vasquez-USA TODAY Sports

For the month, 35% of all CEFs posted NAV-based returns in the black, with only 7% of equity CEFs and 56% of fixed income CEFs chalking up returns in the plus column. The Pacific ex-Japan CEFs classification (-0.80%) mitigated losses better than all the other equity classifications, followed by Emerging Markets CEFs (-2.22%) and Real Estate CEFs (-2.99%). For the third consecutive month, domestic taxable bond CEFs posted a loss on average (-2.13%), bettered by world income CEFs (-0.36%) and municipal bond CEFs (+1.32%). Two of the domestic taxable fixed income CEF classifications posted plus-side returns for the month: U.S. Mortgage CEFs (+0.90%) and Corporate Debt BBB-Rated CEFs (+0.85%). Loan Participation CEFs (-3.35%) and High Yield CEFs (Leveraged) (-2.85%) were the macro-group’s laggards. In this report we highlight December 2018 CEF performance trends, premiums and discounts, and corporate actions and events.

Highlights:

  • For the third month in four, equity closed-end funds (CEFs) and fixed income CEFs on average witnessed a loss, declining 6.13% and 0.37%, respectively, on a net-asset-value (NAV) basis for December.
  • Only 9% of all CEFs traded at a premium to their NAV, with 10% of equity CEFs and 8% of fixed income CEFs trading in premium territory. National municipal debt CEFs witnessed the largest widening of discounts for the month among Lipper’s CEF macro-groups—220 basis points (bps) to 12.12%.
  • Pacific ex-Japan CEFs (-0.80%) mitigated losses better than all other equity CEF classifications for the month.
  • Two domestic taxable fixed income CEF classifications posted positive returns for the month: U.S. Mortgage CEFs (+0.90%) and Corporate Debt BBB-Rated CEFs (+0.85%).
  • For the second month in a row, the municipal debt CEFs macro-group posted a plus-side return on average (-1.32%), with all classifications in the group witnessing positive returns for December.

Download our Closed-End Funds FundMarket Insight Report: The Month in Closed-End Funds: December 2018 here.

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