Yet another MLP closed-end fund will launch soon.
Cohen & Steers MLP Income & Energy Opportunity Fund, ticker MIE
has been updating their S-1. The fund will be taxed a s a RIC so must
pay out at least 98% of their ordinary income and 98.2% of their capital
gains, or be subject to a 4% excise tax. The fund intends to implement a
level rate distribution
so the quarterly
distribution will remain the same regardless of their net investment
income. And of course, as most CEFs do, they reserve the right to
implement a managed distribution
policy, pending SEC approval for
exemption from section 19(b) and rule 19b-1 of the 1940 Act. That
section limits the frequency that a fund can pay out realized capital
gains in their distributions to once, or twice (if spill over from
previous tax year) per tax year. The SEC routinely approves requests for
MDPs today although in the past when approval was not so forthcoming
CEFs routinely by-passed those restrictions by labeling the cap gains as
return of capital. A fund can issue ROC at any time, and without any
filings with the SEC, then re-characterize that ROC as NII after the end
of the tax year.
Here's the link to the latest amendment.http://www.sec.gov/Archives/edgar/data/1564216/000119312513122491/0001193125-13-122491-index.htm
new CEF launch seems typical of a market/sector reaching a top. That
is, you have a CEF sponsor launching a specialized fund, and deploying
most of their new capital, AFTER the sector has been on fire. This sure
seems reminiscent of the REIT CEFs which were launched in 2006 and
And I have to ask....what the hell does Cohen & Steers
know about MLPs??? C&S is a REIT shop, and has been for ages. Will
they employ an experienced MLP sub-advisor? It appears not to be the
case. The investment manager is Cohen & Steers Capital Management.
The two investment managers are Robert Becker and Benjamin Morton.
Becker formerly ran a Franklin utilities fund and Morton was/is a
utilities analyst. It is likely that they are very competent in their
The reality is that MIE will NOT
really be an
"MLP" fund. A RIC (regulated investment company) is limited by the
American Jobs Creation Act of 2004 to a maximum of only 25% of its
assets in MLPs. Thus, MIE, despite having "MLPs" listed prominently in
the name of the fund, will have 75% of its holdings in non-MLP energy
securities. It seems to me that MIE will be a utilities fund, run by
utility analysts, disguised as an MLP fund. That might be very confusing
for newbie investors in MLPs and/or CEFs.
Additionally, the IPO will be priced at $20 for only $19.06 worth of assets. The hidden
premium is 4.5% and will be supported by the Underwriters of the
offering for up to 45 days.
As always, just the opinions of an amateur investor.