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Brookfield Global Listed Infrastructure Income Fund (NYSE: INF)
Would anyone be willing to opine on the relatively new closed-end fund Brookfield Global Listed Infrastructure Income Fund (NYSE: INF)? There also is an open-end version of the fund that goes by the name Brookfield Global Listed Infrastructure Fund (BGLAX, BGLCX, BGLIX, AND BGLYX).
Personally, I am invested in individual infrastructure plays and like Brookfield Infrastructure Partners (BIP), but BIP also results in a k-1 at tax time. I am also invested in another infrastructure play or two and am looking for others of interest.
Let me say this - I do like Brookfield a great deal (I own both Brookfield Infrastructure and Brookfield Asset Management) and while the closed-end Brookfield Global Infrastructure fund is probably fine - Brookfield certainly has an expertise in the area - it didn't have a good start (and maybe that's just another example of why not to buy a closed-end fund at IPO.) It has done better recently and does pay a nice monthly dividend. So, I think the Brookfield closed-end fund (INF) does get a nice income stream, it is managed by a company that specializes in infrastructure, global in nature and monthly payout.
However, it could trade at a substantial discount for an extended period (which can be said for any closed-end fund), it does use leverage and while it has done well this year, it didn't have a great start - hopefully the recent performance can continue, especially with infrastructure getting more interest, which I don't think is surprising.
Personally, I'd rather the open-end version - I didn't know there was an open-end version available. I'm not a huge fan of closed-end funds and swinging discounts/premiums.
The DWS Global Infrastructure fund (TOLLX) is a mutual fund I'd recommend in the infrastructure space, or you could go with the open-end version of the Brookfield fund.
As a unique infrastructure play, I really like Brookfield Infrastructure (BIP), which is an MLP that invests in individual infrastructure projects (rail, toll roads, ports, etc) and timber. Again though, while a unique investment it results in a K-1 form and has run up quite a bit.
As I see it, Brookfield's expertise lies in owning and managing assets, and that is why I own BIP, and have owned BAM in the past. They are likely smarter than the average bear in operating a CEF or OEF consisting of other infrastructure companies, but that is not their strength and their track record in this space is short.
In addition, INF doesn't interest me because of the 25% leverage, which adds significant costs (2.61% expense ratio you pay) and volatility. And I really don't think most investors need a leveraged fund.
As for the OEFs, the only reasonably priced fund classes that I might consider would be BGLIX and BGLYX, but unfortunately, these classes are not available at Wellstrade, TDA, Schwab, Scottrade, Firstrade, and Fidelity. And I would definitely not buy the loaded classes.
Thank you Scott and Kevin for your most valuable input. Now, if at some point in the future I decide to invest in shares of BIP, then what do I get to look forward to at tax time (ugh!). Will my wife have to go on an extended vacation? But seriously, are concerns over the K-1 form overstated? And what would the tax consequences, if any, if these shares were to be held in an IRA (traditional or Roth)?
Dan, I own BIP in my retirement account, and according to my research, in such accounts, the K-1 amount is treated like any other money earned and taxable only when you start withdrawals.
I will say that I don't think K-1's are much of an issue, especially with one or two that you can prepare or bring to your advisor. If you are getting 10 or 20 (and some people who are invested in a ton of MLPs for the income certainly do), then that may be problematic. The one annoyance is that they in many cases do arrive later - I had one last year that barely arrived by the tax deadline (not Brookfield.)
Brookfield - to me, at least - is a looong term holding and a large holding at this point. I like the infrastructure space a great deal and there is really nothing like Brookfield Infrastructure (BIP), in that you have a company that has global scope and the ability to be involved with many different kinds of infrastructure projects, as well as the flexibility to possibly buy infrastructure assets on the cheap if governments - local or otherwise - start having to sell assets to raise capital. In the meantime, the 4.5% yield is nice.
Reply to @kevindow: There is a limit of Unrelated Business Income. If your K-1 indicates UBI you might be subject to taxes even if the monies are in IRA. I've had a few leveraged ETF's issuing K-1 in IRA but UBI was 0 so no taxes was due. If you have to pay taxes the rules are complicated and you might need some CPA help to do your taxes.
Scott, Kevin, Others...What metrics do you use to evaluate BIP -- price to book value? I think it is about 1.4 right now. What would be a reasonable entry price for BIP or a price at which you buy more BIP?
Reply to @BWG: I don't really plan on buying any more personally as I think it's getting to the point where if I bought much more it would start to become a little too influential/reliant on performance. I'm looking at other infrastructure-related plays rather than adding more to BIP.
That said, I don't plan on selling any, either - I think it's a unique play on infrastructure (although there are some somewhat similar things, such as Cheung Kong Infrastructure and McQuarrie Infrastructure Company, although I think the latter got into real trouble in 2008 - the former barely trades on the pink sheets) and I'm happy to collect the dividends from BIP, which I've held (with the exception of a gap last Summer) since around December 2010.
I think BIP is moderately richly valued at this point, but with the desperation for yield, that could go on for a while. I think there's also starting to be more interest in infrastructure, and given the fact that BIP is largely unique, it's probably seeing money flows from that standpoint, as well.
I do think that parent company Brookfield Asset Management (BAM), while definitely NOT a pure play on infrastructure nor does it offer a large dividend, is undervalued. Brookfield Asset Management is planning another BIP-like spin-off of their real estate assets, which will be called Brookfield Property Partners, and which is thought to be scheduled for later this year.
Well, BIP was a definite buy back in 2008-2010 based on valuations. Now, not so much. But I really don't think that it will go on sale anytime soon. It's like waiting for a new Porsche to go on sale -- it's not going to happen.
Right now I have a 6.5% position in BIP and unlikely to add to it in the near future, unless it gets knocked down at least 5%.
If I didn't already own a significant position, I would likely invest slowly in 4-5 buckets on the days when BIP gets knocked down at least 2%, which has happened on occasion. But of course, do your own due diligence before making any investment.
Reply to @kevindow: I agree with Kevin. I originally bought at the end of 2010 and have - aside from a period last Summer - held it and I've added at some moments that felt rather uncomfortable, but it has continued. It's a really unique/interesting company and there's nothing like it in the infrastructure space, but I think people also look considerably at the yield. What's been rather remarkable is that there have been a number of instances in the last year where the market is tanking, but BIP is one of the few things up.
I will say at this point, I'm pretty doubtful I will add more, just because adding much more will make it too large a position. I wouldn't recommend starting a position in it at this point, especially with another 3%+/new 52wk high today. I will continue to hold and reinvest/DRIP dividends.
Thanks Kevin and Scott...I owned MIC before 2008. Rode it all the way down and sold it too early on the way up in the recovery after 2009. I believe a concern with MIC in 2008 was the quality of the balance sheet and the amount of debt on it. Does BIP have similar issues?
Reply to @BWG: BIP down about 2.65% AH on announcement of equity offering. Also announcing a series of new initiatives (selling some assets, but buying stakes in UK gas distribution, Chilean toll road and looking at new investments in Brazil - company seeks to expand transit/utility platforms.)
The company did have a bit of a rough go in 2008, but did not have the same level of problems that MIC did (sorry to hear about your experience with MIC) and then a merger with Prime Infrastructure and expanded in 2010. Interesting to read about MIC's tax status on the website, structured as a corporation instead of an MLP.
I definitely have a lot of confidence in Brookfield management and its ability to allocate assets opportunistically both at the spin-off and parent level (I continue to own both, and I still think the parent co is undervalued.)
Comments
Personally, I am invested in individual infrastructure plays and like Brookfield Infrastructure Partners (BIP), but BIP also results in a k-1 at tax time. I am also invested in another infrastructure play or two and am looking for others of interest.
Let me say this - I do like Brookfield a great deal (I own both Brookfield Infrastructure and Brookfield Asset Management) and while the closed-end Brookfield Global Infrastructure fund is probably fine - Brookfield certainly has an expertise in the area - it didn't have a good start (and maybe that's just another example of why not to buy a closed-end fund at IPO.) It has done better recently and does pay a nice monthly dividend. So, I think the Brookfield closed-end fund (INF) does get a nice income stream, it is managed by a company that specializes in infrastructure, global in nature and monthly payout.
However, it could trade at a substantial discount for an extended period (which can be said for any closed-end fund), it does use leverage and while it has done well this year, it didn't have a great start - hopefully the recent performance can continue, especially with infrastructure getting more interest, which I don't think is surprising.
Personally, I'd rather the open-end version - I didn't know there was an open-end version available. I'm not a huge fan of closed-end funds and swinging discounts/premiums.
The DWS Global Infrastructure fund (TOLLX) is a mutual fund I'd recommend in the infrastructure space, or you could go with the open-end version of the Brookfield fund.
As a unique infrastructure play, I really like Brookfield Infrastructure (BIP), which is an MLP that invests in individual infrastructure projects (rail, toll roads, ports, etc) and timber. Again though, while a unique investment it results in a K-1 form and has run up quite a bit.
As I see it, Brookfield's expertise lies in owning and managing assets, and that is why I own BIP, and have owned BAM in the past. They are likely smarter than the average bear in operating a CEF or OEF consisting of other infrastructure companies, but that is not their strength and their track record in this space is short.
In addition, INF doesn't interest me because of the 25% leverage, which adds significant costs (2.61% expense ratio you pay) and volatility. And I really don't think most investors need a leveraged fund.
As for the OEFs, the only reasonably priced fund classes that I might consider would be BGLIX and BGLYX, but unfortunately, these classes are not available at Wellstrade, TDA, Schwab, Scottrade, Firstrade, and Fidelity. And I would definitely not buy the loaded classes.
Kevin
Thanks- Alaska Dan
Kevin
Brookfield - to me, at least - is a looong term holding and a large holding at this point. I like the infrastructure space a great deal and there is really nothing like Brookfield Infrastructure (BIP), in that you have a company that has global scope and the ability to be involved with many different kinds of infrastructure projects, as well as the flexibility to possibly buy infrastructure assets on the cheap if governments - local or otherwise - start having to sell assets to raise capital. In the meantime, the 4.5% yield is nice.
See also: http://www.ehow.com/how_5873375_report-k_1-ira-account.html
Thanks in advance
BWG
That said, I don't plan on selling any, either - I think it's a unique play on infrastructure (although there are some somewhat similar things, such as Cheung Kong Infrastructure and McQuarrie Infrastructure Company, although I think the latter got into real trouble in 2008 - the former barely trades on the pink sheets) and I'm happy to collect the dividends from BIP, which I've held (with the exception of a gap last Summer) since around December 2010.
I think BIP is moderately richly valued at this point, but with the desperation for yield, that could go on for a while. I think there's also starting to be more interest in infrastructure, and given the fact that BIP is largely unique, it's probably seeing money flows from that standpoint, as well.
I do think that parent company Brookfield Asset Management (BAM), while definitely NOT a pure play on infrastructure nor does it offer a large dividend, is undervalued. Brookfield Asset Management is planning another BIP-like spin-off of their real estate assets, which will be called Brookfield Property Partners, and which is thought to be scheduled for later this year.
http://beta.fool.com/latimerburned/2012/07/25/a-real-estate-spin-off-to-watch/7753/?ticker=GGP&source=eogyholnk0000001
Well, BIP was a definite buy back in 2008-2010 based on valuations. Now, not so much. But I really don't think that it will go on sale anytime soon. It's like waiting for a new Porsche to go on sale -- it's not going to happen.
Right now I have a 6.5% position in BIP and unlikely to add to it in the near future, unless it gets knocked down at least 5%.
If I didn't already own a significant position, I would likely invest slowly in 4-5 buckets on the days when BIP gets knocked down at least 2%, which has happened on occasion. But of course, do your own due diligence before making any investment.
Kevin
I will say at this point, I'm pretty doubtful I will add more, just because adding much more will make it too large a position. I wouldn't recommend starting a position in it at this point, especially with another 3%+/new 52wk high today. I will continue to hold and reinvest/DRIP dividends.
http://www.brookfieldinfrastructure.com/content/2012_press_releases/brookfield_infrastructure_announces_particiaption_-34934.html
The company did have a bit of a rough go in 2008, but did not have the same level of problems that MIC did (sorry to hear about your experience with MIC) and then a merger with Prime Infrastructure and expanded in 2010. Interesting to read about MIC's tax status on the website, structured as a corporation instead of an MLP.
I definitely have a lot of confidence in Brookfield management and its ability to allocate assets opportunistically both at the spin-off and parent level (I continue to own both, and I still think the parent co is undervalued.)