Third Quarter 2016 CEF Review

The third quarter was another solid period for diversified closed-end fund ("CEF") investors. The average CEF was up 2.37% for the quarter and is now up 13.01% year-to-date. Equity CEFs were positive on average by 3.79%, taxable fixed-income CEFs were up on average 5.04%; municipal CEFs, on the other hand, were lower on average by -0.84% for the quarter. (Source: Morningstar. All data is share price total return data). As I mentioned last quarter, after grinding through a challenging 2015 (particularly the back half of the year), diversified CEF investors have been rewarded with very strong total returns year-to-date (YTD). Many of the factors which benefited several categories of the CEF marketplace the first half of 2016 were also present during the third quarter including: higher equity prices (particularly U.S. equities), continued "Plow Horse" (as our Economics Team phrases it) economic growth in the U.S. economy (which helps to create a positive backdrop for many credit-sensitive CEFs), and high distributions and attractive discounts to net asset values (NAVs). This was particularly true for equity and credit-sensitive categories, which also helped to attract buyers to the secondary market during the quarter.

Click here to continue reading.

Posted on Thursday, November 3, 2016 @ 11:19 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.