{"id":81484,"date":"2023-11-06T23:49:00","date_gmt":"2023-11-07T04:49:00","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/nxg-a-cef-that-invests-in-infrastructure-and-renewables\/"},"modified":"2023-11-06T23:49:06","modified_gmt":"2023-11-07T04:49:06","slug":"nxg-a-cef-that-invests-in-infrastructure-and-renewables","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=81484","title":{"rendered":"NXG: A CEF That Invests In Infrastructure And Renewables"},"content":{"rendered":"
\n

<\/picture>
<\/figcaption><\/figure>\n<\/p>\n

Infrastructure and renewable energy stocks have been hit hard in 2022 and 2023 after doing very well back in 2021. The iShares Global Infrastructure ETF (IGF) is down about 2% year-to-date. The iShares Global Clean Energy ETF (ICLN) is down a whopping 30%.<\/span><\/p>\n

Aside from a change in market psychology, the sector has been hurt by rising interest rates, since infrastructure and renewable energy companies have large capital expenditure budgets. Higher inflation also drives up the cost of raw materials and labor.<\/p>\n

NEP is one of the top ten holdings in the NXG portfolio. In August 2023, NEP reduced its annual unit distribution growth rate target from 12% to 5%-8% through 2026. This caused a big drop in the price of NEP along with a drop in sector leader NEE which owns a large position in NEP.<\/p>\n

Despite the recent selloff, many analysts believe that infrastructure and renewable energy stocks may do well going forward. They benefit from a tailwind of powerful long-term trends such as the urbanization of the global population and the transition to clean energy.<\/span><\/p>\n

NextGen Infrastructure Income Fund<\/strong><\/h2>\n

Ticker: (NYSE:NXG<\/span>)<\/strong><\/p>\n

Inception Date: Sept. 26, 2012<\/p>\n

Total Investment Exposure: 136 Million<\/p>\n

Total Common Assets: 102 Million<\/p>\n

Baseline Expense ratio= 1.92%<\/p>\n

Effective Leverage: 25%<\/p>\n

Discount= -14.45%<\/p>\n

Average 6 Month discount= -18.27%<\/p>\n

Annual Distribution Rate (market price) = 19.3%<\/p>\n

Current monthly distribution= $0.54<\/p>\n

Annual Distribution= $6.48<\/p>\n

IRA\/401K eligible- no UBTI<\/p>\n

Rolling NAV Correlation with GDV= 92%<\/p>\n

Rolling NAV Correlation with NFJ= 88%<\/p>\n

Rolling NAV Correlation with CII= 91%<\/p>\n

The NextGen Infrastructure Income Fund is a closed-end fund that invests equity and debt securities of infrastructure companies. Their portfolio is diversified across a variety of infrastructure sectors, including energy, industrials, technology, and communications.<\/p>\n

The fund is designed to take advantage of traditional infrastructure investment characteristics (e.g. lower correlation to broader market, high barriers to entry, business activities that are vital to economy, etc.).<\/p>\n

NXG – Sector Exposure<\/strong><\/h2>\n

\n

\"Fund<\/picture>
\n

NXG Sector exposure (NXG Web site)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

NXG – Top 10 Holdings<\/strong><\/h2>\n

\n

\"Top<\/picture>
\n

NXG Top 10 Holdings (NXG Web Site)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Note that NEP was the largest holding on June 30, 2023. It has taken a big hit since then but seems to have formed a bottom in the low twenties.<\/p>\n

NXG – Distributions<\/strong><\/h2>\n

On September 1, 2023, NXG announced a 100% increase in the monthly distribution from $0.27 to $0.54. The announced ex-dividend dates and payment dates are listed below:<\/p>\n

\n

\"Fund<\/picture>
\n

NXG Distributions (NXG Web Site)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

The NXG Board seeks to maintain a more stable monthly distribution per share. Because of the current 19% distribution yield, this means a good portion of future distributions will likely be return of capital.<\/p>\n

I believe this higher distribution policy may have been requested by Saba or Bulldog as a way to narrow the discount to NAV which was over 20% in 2022.<\/p>\n

NXG – Institutional Ownership<\/strong><\/h2>\n

Institutional investors own 34.69% of the shares outstanding as of June 30, 2023. The top institutional investor is Raymond James who owned $5.5 million. These are most likely shares held by financial advisors in managed accounts.<\/p>\n

The next two largest holders are activist closed-end fund investors:<\/p>\n