FIF Stock

Closed-end fund, First Trust Energy Infrastructure Fund, will be converted into an exchange-traded fund, narrowing its discount to net asset value to 5.65%. The conversion is expected to happen in Q2 2024, potentially erasing the FIF CEF discount and providing a return of around 6.38% for investors. The underlying stocks in the portfolio have decent valuations and strong cash flows, making them attractive holdings.

First Trust Energy Infrastructure Fund is a pipeline-focused closed-end fund trading at a 5.97% discount to net asset value. FIF is set to convert to an ETF in Q2 2024, which will eliminate the discount and potentially provide a 6.38% return. Hedging the position can mitigate underlying volatility while accepting the pipeline beta can provide stable returns and monthly distributions.

First Trust Energy Infrastructure Fund's discount has narrowed due to its expected merger into an exchange-traded fund structure, which eliminates the potential for material discounts in the future. The fund's performance has been strong thanks to the conversion proposal but also aided by receding risk-free Treasury Rates. The merger will also include its other sister funds, creating a larger fund called First Trust Energy Income Partners Enhance Income ETF, expected to occur in Q2 2024.

First Trust Energy Infrastructure Fund focuses on investing in companies in the energy infrastructure sector, which are critical for modern life but taken for granted. The fund has outperformed its peers, possibly due to its ability to invest in electric utilities and renewables when opportunities exist. The fund's portfolio consists primarily of common equity and has a reasonable level of leverage.