February Yields Mostly Positive Results for Closed-End Funds

The first two months of 2011 have looked much like 2010 in the closed-end fund uniberse, with almost all asset classes going up. Continued broad-based positive performance in closed-end funds occurred despite Middle East turmoil and ongoing mixed economic results in the United States and most developed economies.

Sector Round Up: The RiverNorth Closed-End Fund Index’s best performing asset class in February was Convertible Bonds, returning 7.23%, driven by 3.7% discount narrowing. Non-U.S. Equity closed-end funds returned -0.99% for the month, which is represented completely by emerging market closed-end funds and was the only asset class with negative returns.  

As discussed in January’s article, investment grade bond closed-end funds have performed very well. Represented by two PIMCO funds, investment grade bonds in the RiverNorth Closed-End Fund index returned 6.21% in February, with year-to-date performance of 17.16%. However, the performance of all investment grade closed-end funds on average is only 3.83% year-to-date.

The closed-end fund municipal market turned positive after a three-month skid. The average municipal closed-end fund returned 1.36% in February after dropping 11% over the previous three months. Even with a rebound, municipal closed-end funds are still yielding 1% more than they were three months ago. At a 7% total distribution yield, the closed-end fund market appears to have found buyers again.

February New IPOS:

  • Nuveen launched the Nuveen Energy MLP Total Return Fund (JMF), which will raise as much as $509 million subject to a greenshoe. The fund seeks a tax-advantaged total return by investing in MLP’s in the energy sector.
  • Apollo Global Management launched the Apollo Senior Floating Rate Fund (AFT), which will raise $300 million. The fund will primarily invest in senior floating rate securities with the objective of current income and capital preservation.

In the overall closed-end fund market, the RiverNorth Closed-End Fund Index was up 2.39% in February and up 3.42% year-to-date through Feb. 28th. Discounts on the RiverNorth Closed-End Fund Index have narrowed 0.21% in February and currently stand at 3.06% on average at the end of February.

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