CEF Insights: MEGI And The Growing Need For Infrastructure

Core Insights - The article discusses the investment strategy of the MainStay CBRE Global Infrastructure Megatrends Fund (MEGI), which focuses on three megatrend themes: decarbonization, asset modernization, and digital transformation [3][4] - MEGI aims to deliver high total returns with an emphasis on current income, differentiating itself from peers through its thematic orientation [3][4] Investment Themes - Decarbonization constitutes approximately 50% of the portfolio, focusing on global utilities and contracted power businesses [4] - Asset modernization accounts for 35% of the portfolio, investing in toll roads, airports, and midstream energy assets [4] - Digital transformation makes up about 15% of the portfolio, with investments in cell towers and data centers [4] Distribution Policy - MEGI pays monthly distributions of $0.125 per share, annualized to $1.50, utilizing a managed distribution policy that includes realized capital gains [5] - The fund increased its distribution by 15% in July of the previous year, reflecting consistent earnings and income growth [5] Market Outlook - The listed infrastructure market is believed to have bottomed in October 2023, with a constructive outlook for the asset class [6] - Earnings for infrastructure companies are expected to grow by 8% next year, surpassing the long-term average of 6% [6] Energy Demand Trends - A significant increase in global energy demand is anticipated, with U.S. electricity demand projected to rise by 188% by 2030 [6] - Data centers are expected to grow from 2.5% to 7% of overall electricity demand in the U.S. by 2030, driven by generative AI and electrification [6] Portfolio Positioning - MEGI's portfolio consists of 64 positions, with 88% in common equity and 12% in preferred shares, recently shifting towards more common equity for greater upside potential [7] - Geographically, 51% of the portfolio is in the Americas, 31% in Europe, and 18% in Asia Pacific [7] Strategic Fit in Portfolios - MEGI is positioned as a strong complement to income-focused allocations and other real assets, increasingly funded from broad equity exposures due to attractive valuations [8]