MASTER LIMITED PARTNERSHIPS

Friday, October 24, 2008

MLP index almost unchanged as we head into lunch.

7 comments:

Anonymous said...: Can anybody help me unravel this mystery? I'm trying to figure out why the closed end fund Tortoise Energy Infrastructure (TYG) is trading at a 12.23% discount to NAV. They invest in MLPs and their top holdings include many of the same names that many of us MLPers hold, to wit:

Enbridge Energy Partners LP 7.45%
Kinder Morgan Management LLC 7.21%Enterprise Products Partners LP 6.89%
Plains All American Pipeline LP 6.84%
Magellan Midstream Partners LP 6.68%
Energy Transfer Partners LP 6.45%
MarkWest Energy Partners L P 5.94%Inergy 4.38%
NuStar Energy LP 4.18%

Wouldn't an investment in TYG give one access to those assets at a respectable discount?

Lee; 10/24/2008 12:21 PM
Anonymous said...: Other closed end funds are trading at discounts to NAV, so I don't think it's unique to Tortoise. Other factors are at work. What is affecting MLPs in general, and making some of them trade at discounts to NAV, is an artifact of the distortions and fears in the credit markets, not a reflection of business conditions, although with a steep enough recession, that may change, too.

steve; 10/24/2008 12:40 PM
Anonymous said...: Steve, the other closed end funds that invest in MLPs are all trading at a premium to NAV. That's why I'm confused. TYG is the only one trading at a discount. Apart from the added expense of their management fee, it seems like a good idea to snatch some of it at these discounted levels... unless I'm missing something.

Lee; 10/24/2008 12:45 PM
Anonymous said...: Does TYG use leverage?; 10/24/2008 2:01 PM
Anonymous said...: TO: mlpsrgood4u

TYG uses about 35% leverage. In a recent press release they warned that collapsing MLP prices could cause a covenant problem, triggering sales...sort of a margin call effect. They can easily cure it by deferring distributions, so I don't worry about it. BUT, that may be why the discount is so pronounced. I would think it is opportunity writ large!

Dave; 10/24/2008 2:02 PM
Anonymous said...: Lee, according to ETFConnect (www.etfconnect.com), TYG was trading at a 0.80% premium as of 9/30/08 (not very timely reporting!). Also, the most recent quote of the NAV (symbol XTYGX) on Yahoo Finance is 10/3/08, again not timely. Finally, the most recent NAV on the fund internet site is 10/17/08; not timely. Where are you getting your NAV quote from? Adding to previous comments above, the fund is 38% leveraged and can invest up to 25% of assets in junk bonds; this information from ETFConnect. Just my opinions, none of the above makes me want to invest in TYG and I never buy a closed-end fund at a premium (learned that lesson the hard way). A fund that I am considering is MTP, if it trades at a decent discount. FYI, MTP pays a monthly dividend. JCarr; 10/24/2008 2:11 PM
Anonymous said...: To Dave & JCarr:

Sorry for my belated response as I was away from my computer for awhile (hopefully you'll see this). Your explanations of TYG's use of leverage and investments in junk bonds would explain the disparity in valuation.

As for where I found the reference to the discount to NAV, I found it in the CEFA site: www.closed-endfunds.com

Thanks for your help.

Lee; 10/25/2008 9:22 AM