CEF April Monthly Review: Real Estate Funds Rock

Includes: BIF, GGN, RQI, VNQ
by: Joe Eqcome

For the month of April, average share price performance for CEF fund types was up 10.7% (the aggregate, unweighted average of 647 CEFs was up 10.5%) versus 9.9% for the S&P 500, as measured by SPDRs S&P 500 ETF (NYSEARCA:SPY). (YTD, 643 CEFs on an aggregate, unweighted basis had a Distribution Yield of 9.8%, a Discount to NAV of 7.2% and a 13.8% share price appreciation.)

Special Equity Funds advanced 20.9% based upon the strong appreciation of real estate CEFs. (Such funds make up over 40% of the SpecEqFnds category). The top 6 performing SpecEqFnds for the month were real estate funds with an averaged advance of 65.5%. By comparison, the Vanguard REIT Index ETF (NYSEARCA:VNQ) was up 30.7% for the same period. The beaten down commercial real estate sector’s reprieve is being attributed to successful REIT equity offerings allowing REITs to pay down debt and increased likelihood of TALF extending loan “guarantees” to 5 years helping facilitate liquidity in the $700 billion CMBS sector. (The recent REIT equity offering may result in lower distribution levels per share in the interim as a result of dilution.)

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The CBOE Volatility Index (^VIX) continues to recede; down 17.3% for the month and has now fallen into the 30’s. This drop in the “fear index” support investors shunning the more conservative munis and investment grade fund types in favor of previously riskier fund types as preferred and equities. The average difference between CEF share price increase and NAV increase for the month was 2.5% indicating positive investor sentiment towards this market segment.

For sake of weekly comparison, SPDR S&P 500 (SPY) was up 9.9%. In the debt category, Vanguard Total Bond (NYSEARCA:BND) and iShares Muni Fund (NYSEARCA:MUB) were up 0.1% and 2.0%, respectively; the iShare MBS Bond ETF (NYSEARCA:MBB) was off 0.1%. With regards to commodities, Gold ETF (NYSEARCA:GLD) stepped down an additional 3.3%, while oil, as measure by the US Oil ETF (NYSEARCA:USO), dropped 1.4%. Oil prices feel like they are struggling to advance.

As would be expected, the best performer for the month was a real estate CEF. Cohen & Steers Quality Income Realty (NYSE:RQI) was up 77.6%. The Gabelli Global Gold, Natural Resources & Income Trust (NYSEMKT:GGN) was down 18.4%. Boulder Growth & Income Fund (NYSE:BIF), up 10.1% for the month, is being placed on the “Watch List” with positive implications. (Click here for report on BIF).

Disclosures: Author owns SPY, GLD, USO, RQI and BIF