Lipper Closed-End Fund Summary: July 2015

By | August 6, 2015

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By Tom Roseen While for the third consecutive month equity CEFs suffered negative NAV-based returns (-0.72% on average for July) and market-based returns (-1.96%), for the first month in three fixed income CEFs were able to claw their way into positive territory, returning 0.45% on a NAV basis and 0.82% on a market basis While the NASDAQ Composite managed to break into record territory in mid-July after a strong tech rally following Google’s surprising second quarter result, as in June advances to new highs were generally just at the margin. Despite signs of improvement in Greece’s debt crisis and on China’s stock market meltdown, investors turned their attention to second quarter earnings reports and began to evaluate the possible impacts slowing growth from China and the global economy will have on market valuations. The markets remained fairly volatile during July. At the beginning of the month rate-hike worries declined slightly after an inline jobs report and soft wage growth were thought to give policy makers an excuse to postpone rate hikes until December. The Labor Department reported that the U.S. economy had added 233,000 jobs for June. And while the unemployment rate declined to 5.3%, most of it was due to people leaving the labor force. With the Chinese market taking back some of its losses and the Greek debt saga appearing to be closer to a resolution, European stocks rallied mid-month. However, later in the month disappointing earnings results from the likes of Apple (NASDAQ: AAPL ), Caterpillar (NYSE: CAT ), and Exxon (NYSE: XOM ) and commodities’ continuing their freefall placed a pall over the markets. Concerns over slowing global growth and the Shanghai Composite’s recent meltdown weighed on emerging markets, sending Lipper’s world equity CEFs macro-group (-1.52%) to the bottom of the equity CEFs universe for the month. While plummeting commodity prices weren’t much kinder to domestic equity funds (-0.80%), investors’ search for yield helped catapult mixed-asset CEFs (+0.77%) to the top of the charts for July. With China suffering its worst monthly market decline in six years, crude oil prices closing at a four-month low, and gold futures posting their worst monthly performance in two years, investors experienced bouts of panic and sought safe-haven plays intermittently throughout the month. At maturities greater than two years Treasury yields declined, with the ten-year yield declining 15 bps to 2.20% by month-end. For the first month in four all of Lipper’s municipal bond CEFs classifications (+1.10%) witnessed plus-side returns for July. However, domestic taxable bond CEFs (-0.13%) and world bond CEFs (-0.98%) were pulled down by investors’ risk-off mentality. For July the median discount of all CEFs narrowed 2 bps to 10.50%-worse than the 12-month moving average discount (9.13%). Equity CEFs’ median discount widened 41 bps to 11.15%, while fixed income CEFs’ median discount narrowed 58 bps to 9.86%. For the month 46% of all funds’ discounts or premiums improved, while 51% worsened. To read the complete Month in Closed-End Funds: July 2015 Fund Market Insight Report, which includes the month’s closed-end fund corporate events, please click here . Scalper1 News

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