The Tortoise Power & Energy Infrastructure Fund (TPZ) has not had an easy time of it. Investors who are aware that the fund is classified as an MLP fund by CEFConnect will not be surprised by the fund’s -32% NAV return year-on-year and a 59% NAV drawdown. However, they may be surprised by the fact that the fund outperformed the MLP sector by 21% in its drawdown and 18% in is year-on-year NAV return. This is because TPZ is not your run-of-the-mill MLP fund. Rather the fund holds 2/3 of its portfolio in pipeline bonds, many of which are investment-grade rated. This allows the fund to maintain a more defensive characteristic. Despite this more defensive posture the fund is trading at a wider discount than the sector average: 29.4% versus 26% sector average.
The fund recently released a couple of reports – let’s have a look.
First up is the Section 19a which shows that the fund has delivered 37% of its most recent distribution as ROC. Normally, this would raise alarm bells, however, for a fund that holds a third of its portfolio in MLPs, this makes sense given the tax treatment of MLP distributions.
Secondly, the fund has released its Q3 report showing that it delivered distributable cashflow relative to net assets of 6.36% – not far off the 6.94% figure of Q2. We generally like to look at two quarters of results given bonds make semi-annual payments. When we take this number and adjust it by the fund’s nearly 30% discount we get to a price yield of over 9%.
Decent yield plus potential tailwind of discount revaluation makes for an interesting combination.
Thanks for reading.
Check out more of our analysis at Systematic Income.
