Following the third quarter, when the average closed-end fund (CEF) returned -1.25%, CEFs rebounded during the fourth quarter with the average CEF returning +2.38%. This helped push the average CEF to return a very solid +16.32% for 2021. It was a broad rally in the fourth quarter with equity CEFs returning an average of +4.77%, fixed-income CEFs returning an average of +0.79%, municipal CEFs returning an average of +0.88% and taxable fixed-income CEFs returning an average of +0.67%.

The full year 2021 results are particularly impressive with the average CEF returning +16.32%. Equity CEFs returned an average of +27.28%, fixed-income CEFs returned an average of +10.01%, municipal CEFs returned an average of +8.10% and taxable fixed-income CEFs returned an average of +11.49%.

For 2021, CEF performance was boosted by a significant narrowing of discounts to net asset value (NAV), more on that below, and very strong performance across the equity markets and key credit sensitive fixed-income indices. Indeed, for the year, equity CEFs benefitted from a 28.68% gain in the S&P 500 Index as well as the 7.82% gain in the MSCI All-Country World Ex US Index (Source: Bloomberg). Many key fixed-income indices also posted strong performance in 2021 and helped the performance of several taxable fixed-income categories of the CEF marketplace. For example, for 2021 the ICE BofA High-Yield Bond Index returned +5.35% and the S&P/LSTA Leveraged Loan Index returned +5.20% (Source: Bloomberg). The solid underlying performance of the senior loan and high-yield markets helped two of our favored fixed-income CEF categories (senior loan and limited-duration) post very strong performance results for 2021. Indeed, for 2021 senior loan CEFs returned an average of +20.67% and limited-duration CEFs returned an average of +13.19%.