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Closed-end Funds Suffer Sharp Losses in May

By Hal M. Bundrick

NEW YORK (MainStreet)--Even though the markets took a turn lower by month's end, many U.S. stocks soared to 52-week highs and the Dow and S & P 500 set all-time record highs in May. Yet closed-end funds spun in the opposite direction and took a sharp turn lower, according to Lipper. From a market-price standpoint, fixed income CEFs felt the most pain, declining -5.26%, while equity closed-end funds lost -0.74% for the month.

The losses for equity CEFs on an NAV basis were the first declines since October 2012, down 0.67%, while their fixed-income counterparts suffered an NAV loss for the first month in three, down 1.55% for May.


Treasury and government mortgage bonds were in the midst of a brisk sell-off in May and every single member of the Lipper municipal bond sector posted significant losses with national muni bonds down -1.83% and state municipal bond funds losing just under 2% (-1.98%) for the month.

Only two Lipper fixed income classes posted profits for the month. Loan Participation Funds gained 0.53% while High Yield Funds squeezed out a meager profit of 0.10%.

On the equity side, just five of Lipper's twelve equity closed-end fund classifications posted positive returns for the month, led by Convertible Funds with a 2.02% monthly gain and Core Funds up 1.95%. Finding the cellar were Emerging Markets Funds (-3.05%) and Real Estate Funds (-4.30%, April's leader) -- the biggest Lipper losers in May.


World closed-end funds offered no relief during the month. Worries about slower growth in China combined with a stronger U.S. dollar saw World Equity CEFs lose -1.56% and World Income closed-end funds drop from a cliff, with losses of -3.62% in May.

Meanwhile, the S&P 500 posted its seventh consecutive month of positive returns, up 2.08% for May. The Dow was on a six-month winning streak, gaining 1.86%.

--Written by Hal M. Bundrick

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