Closed-End Fund Discounts Widen Again in November

Discounts on closed-end fund discounts increased in November for the third straight month to the widest median discount in seven years.

The median closed-end funds tracked by Lipper finished the month at a 10.33% discount to the value of its holdings, compared with 8.72% below net asset value at the end of October.

The November level was the widest since November 2000, after the tech bubble burst.

"From a historical view, 2000 was kind of a turning point" for the economy, says Tom Roseen, a senior analyst at Lipper. "It was a very down market. I'm not going to say closed-end investors are a forecasting tool at all, but it certainly makes me look at it and see that the closed-end fund market started pricing up a really high discount."

By Nov. 30, only 51 funds in the closed-end universe were trading at a premium to NAV, after peaking at a one-year high of 240 funds selling at a premium on May 31.

Only 25% of all closed-end funds experienced narrowed discounts or widened premiums in November.

Despite a four-session rallly at the end of the month, the S&P 500 finished November down 4.3%, and the NASDAQ fell 6.9%. As a result, closed-end funds that invest in stocks had negative returns for the first time in four months. The average closed-end equity fund tracked by Lipper lost 5.33% for the month.