The Month In Closed-End Funds: August 2019

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Includes: ASA, BBN, BHK, DNP, NBB, PCK, PNF, RFI, RNP, RQI
by: Tom Roseen
Summary

For the first month in three, equity CEFs on average posted negative returns, losing 1.48% on a NAV basis for August.

While for the eighth month in a row, fixed income CEFs chalked up returns in the plus column (+0.84%).

Only 19% of all CEFs traded at a premium to their NAV, with 19% of equity CEFs and 19% of fixed income CEFs trading in premium territory.

Utility CEFs (+1.63%) posted the strongest positive returns of all equity CEF classifications for the month.

The California Municipal Debt CEFs classification (+2.81%) posted the strongest plus-side returns in the fixed income universe for the month.

Photo Source: REUTERS/Andrew Kelly. A screen on the trading floor at the New York Stock Exchange (NYSE) displays news of stocks rallying after a statement by U.S. President Donald Trump regarding China trade deal in New York City, U.S., August 26, 2019.

For the month, 51% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with only 36% of equity CEFs and 62% of fixed income CEFs chalking up returns in the plus column. For the second month in a row, Lipper’s mixed-asset CEFs macro-group (-0.37%) mitigated losses better than its two equity-based brethren: domestic equity CEFs (-1.61%) and world equity CEFs (-2.15%). For the first month in 14, the Utility CEFs classification (+1.63%) outperformed all other equity classifications, followed by Real Estate CEFs (+1.18%) and Income & Preferred Stock CEFs (-0.17%).

For the first month in three, municipal bond CEFs moved to the top of the leaderboard, posting a plus-side return on average (+2.39%), followed by domestic taxable bond CEFs (+0.01%) and world income CEFs (-2.39%). Only four of the domestic taxable fixed income CEF classifications posted plus-side returns for the month, with Corporate BBB-Rated Debt CEFs (+2.27%), Corporate BBB-Rated Debt CEFs (Leveraged) (+1.58%), and U.S. Mortgage CEFs (+0.94%) posting the strongest returns of the group. For the tenth consecutive month, the municipal debt CEFs macro-group posted a return in the black (+2.39%) on average, with all the classifications in the group experiencing plus-side returns for August.

For August, the median discount of all CEFs widened 120 basis points (bps) to 6.85%—still narrower than the 12-month moving average median discount (8.36%). In this report, we highlight August 2019 CEF performance trends, premiums and discounts, and corporate actions and events.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.