VLT - The Month In Closed-End Funds: October 2022

Summary

• For the first month in three, equity CEFs (+4.49%) on average witnessed plus-side returns, while their fixed income CEF cohorts (-5.07%) suffered a third month of declines in October.
• Only 17% of all CEFs traded at a premium to their NAV at month end, with 24% of equity CEFs and 11% of fixed income CEFs trading in premium territory.
• Natural Resources CEFs (+13.36%) outshined the other classifications in the equity CEF universe for October.
• For the first month in 20, High Yield CEFs (Leveraged) (+1.84%) moved to the top of the leaderboard in the fixed income CEF universe for October.
• For the third month in a row, the municipal debt CEFs macro-group posted a negative return (-2.28% on average), with all nine classifications experiencing negative performance for the month.

For the month, 59% of all closed-end funds (CEFs) posted net-asset-value (NAV)-based returns in the black, with 79% of equity CEFs and just 43% of fixed income CEFs chalking up returns in the plus column. For the first month in three, Lipper’s domestic equity CEFs (+5.36%) macro-group outpaced its two equity-based brethren: world equity CEFs (+4.10%) and mixed-assets CEFs (+2.16%). For the first month in five, the Natural Resources CEFs classification (+13.36%) moved to the top of the equity leaderboard, followed by Energy MLP CEFs (+12.77%) and Diversified Equity CEFs (+7.39%).

For the second consecutive month, the domestic taxable bond CEFs macro-group outpaced or mitigated losses better than the other macro-groups in the fixed income universe, posting a 0.63% gain on average, followed by world income CEFs (+0.52%) and municipal debt CEFs (-2.28%). Fixed income investors continued their search for yield while shunning tax-exempt issues in October. For the first month in 20, investors pushed High Yield CEFs (Leveraged) (+1.84%) to the top of the domestic taxable fixed income leaderboard (and fixed income universe), followed by High Yield CEFs (+1.65%) and Loan Participation CEFs (+0.70%).

For October, the median discount of all CEFs widened 11 basis points (bps) to 9.90%—wider than the 12-month moving average median discount (6.42%). In this report, we highlight October 2022 CEF performance trends, premiums and discounts, and corporate actions and events.

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