First Trust MLP and Energy Income FundNYSE: FEI

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 Common is a top-performing MLP/midstream CEF. A proposed ETF conversion offers arbitrage opportunity for FEI investors. The merger is expected to eliminate the CEF discount and provide an opportunity for investors to exit at NAV.

We review CEF market valuation and performance through the first week of November and highlight recent market action. CEFs experienced a rebound with all sectors rallying. REITs were in the lead with a nearly 14% gain. Several First Trust Energy/MLP CEFs have announced a merger into a new ETF which can drive both lower fees and discount amortization.

First Trust MLP and Energy Income Fund Common is an attractive alternative to the Alerian MLP ETF for income-oriented investors who want high yield without K-1s. FEI's top holdings are generally very solid stocks. FEI currently trades at a 13% discount to its NAV, making it an attractive option.

First Trust MLP and Energy Income Fund Common has delivered a solid performance among energy infrastructure funds with a 10.88% total return year-to-date. The FEI closed-end fund could continue to deliver respectable returns due to the potential undersupply of crude oil and rising energy prices. The fund invests in the common equity of midstream partnerships and corporations, providing access to a larger investment universe than the MLP index.