CEE - The Month In Closed-End Funds: October 2023

2023-11-08 03:54:37 ET

Summary

• For the third straight month, both equity (-2.52% on a NAV basis) and fixed income (-1.62%) CEFs on average suffered downside performance.
• At month end, 6% of all CEFs traded at a premium to their NAV, with 8% of equity CEFs and only 5% of fixed income CEFs trading in premium territory.
• Utility CEFs (-0.52%), for the first month in seven, mitigated losses better than the other classifications in the equity CEF universe for October.
• Loan Participation CEFs (-0.28%), for the third straight month, outperformed the other classifications in the domestic taxable fixed income CEF universe.
• The world income CEFs macro-group (-0.88%) outpaced its domestic taxable bond (-0.92%) and municipal debt (-3.00%) CEF counterparts for the first month in three.

For the month, just 13% of all closed-end funds (CEFs) posted net asset value (NAV)-based returns in the black, with 13% of equity CEFs and 13% of fixed income CEFs chalking up returns in the plus column. The average equity and fixed income CEF posted NAV-based losses of 2.52% and 1.62%, respectively, for October.

Lipper’s domestic equity CEFs (-2.12%) macro-group, for the first month in 12, mitigated losses better than its two equity-based brethren: mixed-assets CEFs (-3.04%) and world equity CEFs (-3.24%). The Utility CEFs classification (-0.52%, September’s laggard) moved to the top of the equity leaderboard for the first month in seven, followed by Energy MLP CEFs (-0.78%) and Real Estate CEFs (-1.42%).

Year to date, fixed income CEFs still managed to post plus-side returns on a NAV basis, rising 1.42% while their equity counterparts posted a 0.31% decline.

The world income CEFs macro-group—for the first month in three—outpaced or mitigated losses better than the other two macro-groups in the fixed income universe, posting a 0.88% loss on average, followed by domestic taxable bond CEFs (-0.92%) and municipal debt CEFs (-3.00%). For the third consecutive month, investors kept Loan Participation CEFs (-0.28%) at the top of the domestic taxable fixed income leaderboard, followed by General Bond CEFs (-0.75%) and High Yield CEFs (-0.80%).

The median discount of all CEFs widened 74 bps to 13.03% for October—wider than the 12-month moving average median discount (10.28%). Equity CEFs’ median discount widened by 75 bps to 13.86%, while fixed income CEFs’ median discount widened by 118 bps to 12.27%.

In this report, we highlight October 2023 CEF performance trends, premiums and discounts, and corporate actions and events.

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