DTM - First Trust MLP and Energy Income Fund's Transition To ETF Makes For Attractive Opportunity

2024-03-10 11:10:26 ET

Summary

• First Trust MLP and Energy Income Fund is converting from a closed-end structure to an ETF structure, offering a potential 4.3% upside if assets trade around net asset value after the conversion.
• The transformation involves merging several closed-end pipeline funds into an ETF, including the First Trust Energy Infrastructure Fund.
• The merger of the MLP C Corp Funds should be tax-free to shareholders, but there may be a tax impact at the fund level.

First Trust MLP and Energy Income Fund ( FEI ) is a closed-end fund in the midstream space. Mostly investing in pipeline operators. The primary reason I'm interested here is that it is about to convert from a closed-end structure to an ETF structure. Its discount to net asset value is only 4.13% (which is very low for a pipeline CEF) but that's because the conversion is scheduled for Q2 2024. My guess is that it will happen early May (based on management disclosures) but if it happens a bit later in the 2nd quarter, that's not a disaster....

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