CEFs Continue to Advance; Real Estate Funds Surge

Includes: GCV, JRS
by: Joe Eqcome

Summary: Closed end funds' (CEF) average fund types continued to advance the week ending 4/3/09. A pattern of price movement again emphasized investors’ willingness to assume greater risk—consistent with a 3.3% drop in the CBOE Volatility Index (VIX). Average price appreciation of 13 CEF fund types was 1.8% while the unweighted average for all 647 CEFs was 2.1%. (CEFs in the aggregate are up 6.0% YTD; Distribution Yield is 10.9%; Discount to NAV narrowed to 8.9%). Special Equity (real estate CEFs leading contributor, up 9.3%) and Preferred fund types led last week up 4.2% and 4.1%, respectively. For the week, CEF investors’ demonstrated confidence as average prices exceeded NAV by 0.5% (5.1% YTD).

For sake of weekly comparison, SPDR S&P 500 (NYSEARCA:SPY) was up 3.2% for the week. Vanguard Total Bond (NYSEARCA:BND) and iShares Muni fund (NYSEARCA:MUB)—for the fourth week in a row—was essentially flat, down 0.6% and up 0.1%, respectively. Gold (NYSEARCA:GLD) dropped an additional 3.4%, while oil, as measure by the US Oil ETF (NYSEARCA:USO), remained flat, down 0.6%. Commercial real estate, as measured by Vanguard Real Estate Investment Trust ETF (NYSEARCA:VNQ), spurted 17.2%. The demonstrated ability of REITs to raise equity capital to pay down debt spooked the shorts.

Nuveen Real Estate Inc Fund (NYSE:JRS) was one of the biggest CEF gainers for the week, up 24.9%. One of this week’s bigger losers was Gabelli Convertible & Income Fund (NYSE:GCV), down 13.6%. GCV recently halved its quarterly managed distribution; it’s trading at an 8.3% distribution yield (5.0% based on net investment income), at par (average for CEF converts) and is in a sector that’s seen revived interest. GCV still burden by ARPS.

Disclosure: Author owns GCV, GLD, USO and SPY.

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