FIRST QUARTER 2022 OVERVIEW
After a year in which the average closed-end fund (CEF) returned an impressive +16.32% (https://www.ftportfolios.com/Commentary/Insights/2022/1/19/fourthquarter- 2021), many CEFs struggled during the first quarter of 2022. Indeed, the first quarter of 2022 was a challenging one for the equity and credit markets as well as for the CEF structure. Rising short- and long-term interest rates coupled with geopolitical concerns helped contribute to a difficult quarter for many asset classes in 1Q22. The total return for the average CEF was -6.99% for the quarter. It was a broad decline as equity CEFs returned -0.45%, fixed-income CEFs returned -10.51%, municipal CEFs returned -13.27% and taxable fixed-income CEFs returned -8.39%. It was a challenge to identify categories of the CEF marketplace that posted positive total returns during the first quarter but Master Limited Partnership (MLP) CEFs returned +23.25% for the quarter and commodity CEFs were also positive for the quarter gaining +10.65%.
Equity CEFs were hurt by a -4.60% total return in the S&P 500 Index as well as by a -5.44% total return in the MSCI All-Country World Ex US Index. Rising interest rates across the curve during the 1Q22 put pressure on several key credit markets as indicated by the negative total returns for many fixed-income indices. Indeed, for the 1Q22 the ICE BofA Investment Grade Corporates Index total return was -7.74%, the ICE BofA Preferreds Index returned -6.72%, the ICE BofA 7-12 Yr. Municipal Index returned -6.29%, and the ICE BofA High-Yield Bond Index returned -4.50%. The best performing of the major bond indices was the S&P/LSTA Leveraged Loan Index, posting a negative return of just -0.10% for 1Q22. (Source: Bloomberg)