INF: Recent IPO'd Infrastructure CEF Is Crumbling

Oct. 5.11 | About: Brookfield Global (INF)

Earlier this year, I published a performance analysis of some closed-end fund IPOs issued in 2009/2010. In every case, the market performance was worse than the NAV performance.

The general pattern has continued this year. But there was a recent infrastructure closed-end IPO that has had one of the worst initial short term starts I have ever seen.

The Brookfield Global Listed Infrastructure Income Fund (ticker:INF) was issued on August 26 at a price of 20. The initial NAV was 19.06 reflecting the sales commission and marketing fees, so the initial premium was about 4.9%.

Usually, the underwriters try to support the IPO price for several months. In this case, the underwriters supported the price at the 20 level for a few weeks, but the net asset value started falling with the markets and the pain must have been too great to continue supporting the price. So on September 23, the price support was discontinued.

INF then started dropping rapidly. In the next week, it fell 23%. Today INF closed at 14.10, down a whopping 29.5% from the IPO price.

Here is a price chart of the INF performance since inception. Notice the straight line at 20 designating the underwriter price support, then the sharp dropoff in price.

The NAV performance of INF has certainly not been very good, but is not nearly as bad as the market price performance. The NAV at today’s close was 16.79, which is only down around 12% from the original NAV.

The current discount to NAV has widened to -16% which is now a larger discount than for other infrastructure CEFs such as MGU or UTF. At this discounted price level, it may be worthwhile to place INF on a trading watchlist. But it may face some headwinds over the next few months if some of the original IPO buyers decide to sell it for a tax loss.

I suspect the brokers who sold this IPO will be getting many phone calls from unhappy clients when they receive their third quarter and year end statements. INF is yet another example demonstrating why it almost never pays to buy a closed-end fund at the IPO price.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.