Chiaro says he believes the fund’s structure of blending MLPs, MLP securities, general partnerships and ETNs is unique, but acknowledges it’s unlikely to stay unique for an extended period. He’s not worried, though. “We believe our core competency is not the structure, but the management of the fund,” he says, adding that Eagle Global has managed MLP investments for about 10 years. “We know the business of MLPs; we focus on securities selection.”
Because the fund is less than a year old, research firms such as Morningstar and Lipper haven’t analyzed it yet. Speaking generally about MLP funds, Mike Taggert, head of Morningstar’s U.S. closed-end fund research, says he wasn’t sure if the tax issue between RICs and C corporations is that drastic. C corporations do pay taxes, but the odds of them triggering a taxable event are “pretty low,” unless they sell one of the MLPs.
Roseen says without knowing Eagle’s general practice for income distributions and portfolio turnover, he can’t comment specifically about the fund. But he says having ETNs in the portfolio are positive for returns.
In separate research he did about MLPs funds, the double taxation has impacted C corporations’ returns in the ETF space, Roseen says. For the year through April 19, the timeframe studied, C corporation ETFs saw returns of 11.5 percent, while RIC-structured ETFs returned 13.4 percent and ETNs returned 19.6 percent.
On the mutual fund side, C corporation funds returned 12.2 percent on average versus 10.84 percent for RIC-structured, which he says isn’t surprising given the strong showing of individual MLPs lately.
Even though MLPs are a relatively complex and niche investment, Taggert says people who know these funds love them. “I can tell you, at Morningstar people love these things,” he says. “People want yield. MLPs are for people who are risk tolerant, but want income.”