Core Viewpoint - The merger of several First Trust closed-end funds into the FT Energy Income Partners Enhanced Income ETF (EIPI) was completed on May 6, 2024, driven by activist investor Saba Capital, resulting in a shift from closed-end funds to an ETF structure, which provides liquidity but also allows for rapid capital outflows [1][3][4]. Group 1: Merger Details - The merger involved the First Trust Energy Income and Growth Fund (FEN), First Trust MLP and Energy Income Fund (FEI), First Trust New Opportunities MLP & Energy Fund (FPL), and First Trust Energy Infrastructure Fund (FIF) [1]. - The assets and liabilities of the Target Funds were acquired in tax-free transactions, with shares converted to newly-issued shares of EIPI based on the net asset values as of May 3, 2024 [2]. - The exchange ratios for the conversion of shares were specified, with FEN at 0.880285, FEI at 0.541658, FPL at 0.428077, and FIF at 1 [5]. Group 2: Impact on Shareholders - The conversion to an ETF structure allowed CEF shareholders to access liquidity at net asset value (NAV), as the CEFs had previously traded at a -10% discount [4]. - Following the merger, EIPI experienced a rapid loss of approximately 15% of its assets under management (AUM), equating to around $200 million, as former CEF holders cashed out [4]. - The ETF structure is expected to reduce significant premium/discount variations that were characteristic of the former CEFs [13]. Group 3: Fund Management and Strategy - EIPI's top holdings include major companies such as Enterprise Products Partners (8.20%), Energy Transfer (5.94%), and ONEOK (5.03%), reflecting a focus on oil, gas, and consumable fuels [10]. - EIPI employs an options income strategy aimed at enhancing returns in flat or declining markets while sacrificing some upside in strongly advancing markets [11]. - The ETF has declared a monthly distribution of $0.125, which annualized represents a distribution yield of 7.93% [12]. Group 4: Future Outlook - EIPI charges an expense ratio of 1.10%, which is a consideration for potential investors [15]. - The merger signifies a strategic shift for First Trust, indicating a potential withdrawal from the closed-end fund business as other CEFs are also being folded into different brands [6].
First Trust MLP CEF Merger Closes, Now EIPI ETF