Tag Archives: infrastructure

Strong Business Fundamentals Yet Again Earn American Electric A Power Bullish Thesis

Summary AEP’s regular transmission business investments will help it expand its rate base. The company is likely to sell competitive assets, which will support capital investment plan. AEP’s on-track cost saving efforts will improve its profit margins. American Electric Power (NYSE: AEP ) has been taking the right measures to address industry challenges. The company’s growth efforts will portend well for its future financial performance. AEP’s hefty growth investments to expand and strengthen its transmission business will positively affect its ROE and allow the company to increase its regulated rate base. Also, rate hikes will better the company’s cash flows, top-line and earnings growth in the years ahead. Moreover, recent rate case approvals at Kentucky and West Virginia will positively affect AEP’s future earnings growth. Given the strong growth potential, I believe AEP’s shareholders will continue to enjoy cash returns in the form of dividends. Furthermore, based on my price target of $69 for AEP, the stock offers price appreciation of 19%. Strong Growth Opportunities at AEP Utility companies are keenly investing in their infrastructure development in order to capitalize on the growth potential of the industry. As far as AEP is concerned, the company, like all other utility companies, has escalated its scale of transmission investments in order to maximize its growth opportunities by utilizing the strong potential of regulated transmission operations. The company has acquired a dominant stake in leading U.S.-based transmission projects and its management feels that there is still a lot of work left on the transmission business side, due to which it constantly allocates a huge portion of its CAPEX to transmission-related projects. Year-to-date, AEP has around 2,000 ongoing transmission projects of both small and large scale. And it plans to take in more projects in future, by spending around $5.2billion on transmission-related projects in 2015 to 2017. These transmission-related investments offer huge growth opportunity for the company by means of rate base expansion, which will ultimately better its ROE, top-line and cash flows in the years ahead. AEP recently got rate increase approval from regulators; AEP got rate case increase approval in West Virginia and Kentucky for $75 million and $45.4 million , respectively. Owing to the recent rate increases and due to the strong potential of its transmission investments, I expect the company’s earnings to grow decently in the years ahead. Moreover, I believe that if AEP moves ahead with its plan to sell 7,900MW competitive business assets, it will have sufficient cash available in future to fund its transmission investments. Currently, the decision to sell the company’s competitive assets is on hold due to the pending PPA decision and due to the pending results of the PJM capacity auction. The company has asked regulators to finalize their decision on the PPA by October 1st in order to help it have a clear picture about the future of its competitive assets. Given the fact that Ohio’s deregulated market has placed AEP’s competitive assets at a disadvantage to its peers, I believe the company will go on with the idea of selling its competitive assets. If the company decides to sell its competitive assets, AEP will have a broader regulated asset base, comprising of rapidly growing transmission business, which will portend well for its long-term growth potential. Also, analysts are expecting a healthy next five-years growth rate of 4.93% for AEP, as shown below. Source: Nasdaq.com Furthermore, AEP is making regular efforts to address the growing concerns over environmental pollution. In this regard, the company has already closed 5600MW of its 10 coal fired plants across five different states and expects to close one more plant of 998MW in 2016. Given the fact that recent “Clean Power Plan” from Obama demands a 30% cut in carbon dioxide emission from power companies, I believe the company’s decision of actively closing its coal-fired plants will improve its image and positively affect its cost structure. AEP is already working on an attractive costs saving plan “Lean Deployment”, under which it is actively seeking to lower its cost burden and improve its profit margins. Investors Remain Rewarded At AEP The company has a strong history of making attractive cash returns to shareholders in the form of dividends. Earlier this month, AEP had announced a quarterly dividend payment of $0.53 per share. The stock offers a dividend yield of 3.63% and has a modest payout ratio of 59% . Given the company’s strong fundamentals, AEP’s management has affirmed their commitment to consistently increase dividends in the years ahead, and AEP targets long-term payout ratio to be in a range of 60% to 70% . Analysts are also expecting the company’s book value and cash flows per share to increase in 2016 and 2017, as shown in the chart below. Source: 4-traders.com Uplifted Guidance For 2015 Based on the company’s strong results in the first half of 2015 and due to its on-track strategic growth efforts, AEP’s management has uplifted the earnings guidance for 2015. As per the updated guidance, the company’s EPS for full year 2015 is expected to be in a range of $3.50 to $3.65 , up from the previously issued guidance of $3.40 to $3.60. AEP also raised its CAPEX guidance for 2015 by $200 million for 2015. Price Target I reiterate my previously calculated price target of $69 for AEP, which was calculated using the dividend discount method. In calculating this price target, I used cost of equity of 6% and nominal growth rate of 3%. The stock offers potential price appreciation of 19% based on my price target. Risks The ongoing development programs at the transmission business side of the company might result in cost overruns or delays, due to potential laxness in execution projects by AEP’s management. Furthermore, tightening environmental compliance regulations, unforeseen negative economic changes and adverse weather conditions are key risks that might hamper the company’s future stock price performance. Conclusion I reaffirm my bullish stance on AEP due to its strong business fundamentals. The company’s regular transmission business investments have placed it on a strong top-line growth-generating path by enabling AEP to expand its rate base. Also, the company is most likely to sell its competitive assets, which will not only support AEP’s capital investment plan, but will also broaden its regulated asset base, which will strengthen its cash flow base in the years ahead. Moreover, I believe AEP’s on-track cost saving efforts will improve its profit margins. Given the strong growth potential of the company’s attractive strategic growth initiatives, I believe its cash flows will improve, which will support its dividend growth in future. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recent Buy – Brookfield Infrastructure Partners L.P.

Summary I initiated a position in Brookfield Infrastructure Partners LP, a utilities and infrastructure company. The diverse sectors of operations and geography, coupled with regulated and contractual cash flow, makes it a very stable and attractive investment. A starting yield of 5.2% and a 5-year dividend growth rate of 12.6% make it very attractive for income-focused investors. The market jitters continue as the world turns its eyes to the US Fed – will they or wont they raise the interest rates? There are a plethora of dangerous financial situations facing the world which could possibly send the stock and bond markets into a turmoil. I continue to purchase looking for good opportunities trying to tune out the noise as a majority of these occurrences are out of control. Whenever I make a purchase, I like to share my buys to document and illustrate how I am building my income stream over the course of months/years. My main goal is simply to keep investing at regular intervals and build my passive income over the course of time. In staying true to tradition, here’s another purchase in my portfolio, this time adding a new company to my portfolio. I initiated a position in Brookfield Infrastructure Partners LP (NYSE: BIP ) (note: it also trades as BIP.UN.TO on TSX, and since I am a Canadian resident, I bought the TSX-listed shares) with 35 shares @ C$53.20. The stock yields 5.18%, adding US$74.20 (~C$96.50) to my forward annual passive income. Brookfield Infrastructure Partners, even though headquartered and based in Canada & trades on the TSX exchange, maintains its financials (and declares dividends) in USD. Company Overview Brookfield Infrastructure Partners L.P. owns and operates utility, transport, and energy businesses. The companys Utilities segment operates a port facility that exports metallurgical and thermal coal mined in the central Bowen Basin region of Queensland, Australia; approximately 10,800 kilometers of transmission lines in North and South America; and approximately 2.4 million electricity and natural gas connections in the United Kingdom and Colombia. Its Transport segment provides transportation, storage, and handling services for freight, bulk commodities, and passengers through a network of 5,100 kilometers of track in Southwestern Western Australia; approximately 4,800 kilometers of rail in South America; approximately 3,200 kilometers of motorways in Brazil and Chile; and 30 port terminals in North America, the United Kingdom, and Europe. The companys Energy segment offers energy transportation, distribution, and storage services through 14,800 kilometers of transmission pipelines; and 370 billion cubic feet of natural gas storage in the United States and Canada, as well as serves approximately 40,000 gas distribution customers in the United Kingdom. Brookfield Infrastructure Partners Limited serves as a general partner of Brookfield Infrastructure Partners L.P. The company was founded in 2007 and is based in Toronto, Canada. Corporate Structure The Brookfield companies have a complicated corporate structure, with each entity intricately weaved with other entities to form a set of public and private companies. The companies include Brookfield Asset Management, Brookfield Property Partners, Brookfield Renewable Energy Partners, and Brookfield Infrastructure Partners. The simple view of where Brookfield Infrastructure Partners fits in under the Brookfield Asset Management umbrella is summarized below. (click to enlarge) Recent Buy Decision I sold my Utilities ETF in June 2015 and have been looking into buying individual companies that can give me dividend growth and better equity ownership. In July 2015, I initiated a small position in Algonquin Power & Utilities Corp (AQN.TO) , and earlier this month I initiated a position in Canadian Utilities (CU.TO) . This adds a third company in the utilities sector. While the classification is under the Utilities sector, Brookfield Infrastructure is, as the name suggests, truly a complete infrastructure company. BIP holds interests in Utilities (39% of revenue), Transport (43% of revenue), Energy (10% of revenue) and Communication Infrastructure (8% of revenue). BIP has a great geographical diversification with operations in North America (8% of revenue), South America (27% of revenue), Europe (34% of revenue), and Australia (31% of revenue). The utilities segment operates: Coal terminals (handles 20% of global seaborne metallurgical coal exports from Australia) 10,800 Kms of electricity transmission lines in North & South America; Regulated distribution of electricity & natural gas connections. The transport segment operates: Railroads: ~5,100 km of track, sole freight rail network in Southwestern Western Australia ~4,800 km rail network in South America Toll Roads ~3,300 km of motorways in Brazil and Chile Combination of urban and interurban roads that benefit from traffic growth and inflation Ports 30 terminals in North America, UK and across Europe One of the UK’s largest port services providers The energy segment operates: Energy Transmission, Distribution and Storage 14,800 km of natural gas transmission pipelines, located primarily in the U.S. Over 40,000 gas distribution customers in the UK 370 billion cubic feet of natural gas storage in the U.S. and Canada District Energy Delivers heating and cooling to customers from centralized systems including heating plants capable of delivering ~2.8 million pounds per hour of steam heating capacity and 251,000 tons of cooling capacity and distributed water and sewage services The communication infrastructure operates: Telecommunications Infrastructure ~7,000 multi-purpose towers and active rooftop sites 5,000 km of fibre backbone located in France Generate stable, inflation-linked cash flows underpinned by long-term contracts with large, prominent customers The diverse sectors of operations and geography, coupled with regulated and contractual cash flow makes it a very stable and attractive investment. A wide economic moat Funds from operations (FFO) have risen at 23% CAGR and distribution has risen 12% CAGR since 2009. BIP is a Dividend Challenger having raised dividends for 7 consecutive years. The current yield is 5.18% and has 1-, 3-, and 5-year dividend growth rates of 11.6%, 13.3%, and 12.6%. BIP has a BBB+ (stable) S&P credit rating and the debt/equity 1.86, and the company holds enough cash to service the debt. Debt repayment schedule has a well laddered maturity profile. BIP just announced earlier this week that it will acquire Australian port operator Asciano for US$6.6B – which will expand the company’s footprint in Australia and help better compete in the space giving BIP better recognition and visibility. The management has made it clear that this is only the beginning this transaction is a ‘stepping stone’ for more expansions in the future. While some share dilution is occurring as part of the deal, AFFO from the deal is expected to increase 7% immediately. Brookfield Infrastructure Partners LP Diversification (click to enlarge) (click to enlarge) Risks As with any investment, there are risks involved. Being in the utilities sector, the risks in the regulated industry is slightly lower. But the non-regulated industry, where most of the growth comes from – can see possible new regulations that could put future growth prospects in doubt. Rise in interest rates can cause the stock prices to tumble in the utilities sector. With international operations, currency fluctuations can cause an unknown movement in revenue, especially since the financials are reported in US$, the international earnings can seem depressed. Further Reading Disclosure: I am long AQN.TO, BIP.UN.TO, and CU.TO. My full list of holdings is available here . Disclosure: I am/we are long BIP, AQUNF, CDUAF. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

An Update On UBS’s ETRACS 2X Leveraged ETNs

Summary Since my last article, UBS has launched two more 2X Leveraged ETRACS ETNs. The mid-year spike in interest rates has pulled down many of these income-generating funds to more attractive levels. Relevant data for all of the funds are updated. Introduction In a Mar. 2015 article entitled ” A Quick Overview Of UBS ETRACS 2X Leveraged ETNs “, I gave a brief introduction to the line-up of 2X leveraged ETNs offered by UBS (NYSE: UBS ). These ETNs cover a broad range of investment classes, including traditional equity as well as alternative investment types such as real estate investment trusts [REITs], mortgage REITs [mREITs], master limited partnerships [MLPs], business development companies [BDCs] and closed-end funds [CEFs]. The use of 2X leverage allows these ETNs to offering alluring headline yields. For further general information regarding the pros and cons of leverage, as well as specific risks regarding these ETNs, please see my previous article . New offerings In May 2015, UBS launched the ETRACS Monthly Pay 2xLeveraged MSCI US REIT Index ETN (NYSEARCA: LRET ), an ETN that tracks twice the monthly return of the MSCI US REIT Index (the same index tracked by the giant Vanguard REIT ETF (NYSEARCA: VNQ )). LRET charges 1.96% in total fees (see below for how this is calculated), and sports a headline 2X index yield of 7.45%. In July 2015, UBS launched ETRACS 2xMonthly Leveraged S&P MLP Index ETN (NYSEARCA: MLPV ), which tracks twice the monthly return of the S&P MLP index. MLPV charges 2.26 in total fees, and sports a headline 2X index yield of 12.49%. The funds UBS currently offers fifteen 2X leveraged ETNs. The following table shows the fund name, ticker symbol, 12-month trailing yield, inception date, the corresponding 1X leveraged fund (where available), average trading volume and total expense ratio [TER] of the ETNs. The TERs were obtained from the funds’ pricing supplements and the remaining data are from Morningstar . Where 12-month trailing yields are not available (for more recent launches), the 2X index yield provided by UBS has been presented. UBS engages in the (rather dubious, in my opinion) practice of hiding their financing spread within their pricing supplement, which makes their headline management fee (known as “tracking rate”) look lower. For example, the UBS ETRACS Monthly Pay 2x Leveraged S&P Dividend ETN (NYSEARCA: SDYL ) has an annual tracking rate of 0.30%, a figure that is displayed prominently on the fund’s website, but you have to dig into the pricing supplement to see that you are being charged an additional 0.40% financing spread, which means that the total financing rate will be 0.40% + 3-month LIBOR (currently 0.31%). Adding all three fees together gives a total expense ratio of 0.30% (tracking rate) + 0.40% (financing spread) + 0.31% (3-month LIBOR) = 1.01%. Since LIBOR is subject to change, in my previous article I excluded LIBOR when quoting the TER of the funds (while reminding readers to be aware of this expense). However, in this article I have decided to quote TER to be inclusive of LIBOR (currently 0.31%) to give investors a better idea of the total fees that are currently paying. Additionally, note that because the funds are 2X leveraged, one should divide the TER by two if one wish to compare the expense ratios with unleveraged funds. I have also rearranged the categories of the funds somewhat compared to the last article. All broad equity, dividend equity, small-cap equity and homebuilder equity ETNs are grouped under “Equity”. The “Alternative Equity” class includes MLP, REIT, mREIT, and BDC funds. “Balanced” includes CEF and multi-asset funds. Fund Ticker Yield Inception Volume TER* 1X Alternative Equity Monthly Reset 2xLeveraged S&P 500 Total Return ETN (NYSEARCA: SPLX ) N/A(1) 3/2014 9K 1.56% SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) Monthly Pay 2xLeveraged S&P Dividend ETN SDYL 5.43% 5/2012 1.8K 1.01% SPDR Dividend ETF (NYSEARCA: SDY ) Monthly Pay 2xLeveraged Dow Jones Select Dividend Index ETN (NYSEARCA: DVYL ) 8.09% 5/2012 8K 1.06% iShares Select Dividend ETF (NYSEARCA: DVY ) Monthly Pay 2xLeveraged US High Dividend Low Volatility ETN (NYSEARCA: HDLV ) 10.02%^ 9/2014 15K 1.76% Monthly Pay 2xLeveraged US Small Cap High Dividend ETN (NYSEARCA: SMHD ) 17.70%^ 3/2015 23K 1.96% Monthly Reset 2xLeveraged ISE Exclusively Homebuilders ETN (NYSEARCA: HOML ) N/A(1) 3/2015 23K 1.96% ISE Exclusively Homebuilders ETN (NYSEARCA: HOMX ) Alternative Equity Monthly Pay 2xLeveraged Wells Fargo MLP Ex-Energy ETN (NYSEARCA: LMLP ) 13.56% 6/2014 23K 1.76% Wells Fargo MLP Ex-Energy ETN (NYSEARCA: FMLP ) Monthly Pay 2xLeveraged MSCI US REIT Index ETN LRET 7.45%^ 5/2015 63K 1.96% Vanguard REIT ETF [VNQ] Monthly Pay 2xLeveraged Mortgage REIT ETN (NYSEARCA: MORL ) 26.52% 10/2012 289K 1.11% Market Vectors Mortgage REIT Income ETF (NYSEARCA: MORT ) Monthly Pay 2xLeveraged Dow Jones International Real Estate ETN (NYSEARCA: RWXL ) 4.99% 3/2012 24K 1.31% SPDR Dow Jones International Real Estate ETF (NYSEARCA: RWX ) 2xMonthly Leveraged Long Alerian MLP Infrastructure Index ETN (NYSEARCA: MLPL ) 15.02% 7/2010 103K 1.16% Alerian MLP Infrastructure Index ETN (NYSEARCA: MLPI ) & ALPS Alerian MLP ETF (NYSEARCA: AMLP ) 2xMonthly Leveraged S&P MLP Index ETN MLPV 12.49%^ 7/2015 1.6K 2.26% iPath S&P MLP ETN (NYSEARCA: IMLP ) 2xLeveraged Long Wells Fargo Business Development Company Index ETN (NYSEARCA: BDCL ) 20.24% 5/2011 164K 1.16% Wells Fargo Business Development Company ETN (NYSEARCA: BDCS ) Balanced Monthly Pay 2xLeveraged Closed-End Fund ETN (NYSEARCA: CEFL ) 22.04% 12/2013 150K 1.21% YieldShares High Income ETF (NYSEARCA: YYY ) Monthly Pay 2xLeveraged Diversified High Income ETN (NYSEARCA: DVHL ) 16.56% 11/2013 15K 1.56% Diversified High Income ETN (NYSEARCA: DVHI ) * Includes 3-month LIBOR (currently 0.31%). ^ 2X index yield provided by fund sponsor. Actual yield may be different. (1) No dividends are paid out as this is a total return fund. Recent performance A chart of the total return performance of the 6 equity-based 2X leveraged ETNs (excluding SMHD, which for some reason doesn’t show on YCharts) since my last article is presented below. SPLX Total Return Price data by YCharts The graph above shows that the 2X homebuilder ETN HOML has outperformed with a total return of 9.88% since Mar. 2010, followed by SPLX with 3.78%. HDLV had a slight positive return of 2.76%, while the two “vanilla” dividend ETNs, SDYL and DVYL, had the lowest total returns of -1.05% and -2.57%, respectively. However, if SMHD had been included in this graph, it would have been by far the worst-performing fund, with a total loss exceeding -15%. A chart of the total return performance of the 7 alternative equity-based 2X leveraged ETNs (excluding LRET and MLPV whose histories are too short) since my last article is presented below. LMLP Total Return Price data by YCharts Unfortunately, all five of the alternative equity ETNs shown in the chart have had negative returns since Mar. 2015. This is not surprising because many of these asset types are considered to be income-generating vehicles that suffered significantly during the interest rate spike in the first half of 2015. MLPL had the worst total return of -21.7%, a consequence of collapsing oil prices, while MORL had the second-lowest total return of -12.8%. The best (relative) performance was turned in by the 2X international real estate ETN RWXL, at -7.17%, followed by BDCL at -7.87%. LMLP had a total return of -8.06% over this period. Finally, a chart of the total return performance of the 2 balanced 2X leveraged ETNs since my last article is presented below. CEFL Total Return Price data by YCharts We can see from the chart above that CEFL had a total return of -9.68% while DVHL had a total return of -12.0%. The total return performances of the 2X leveraged ETNs since Mar. 2015 is shown in the chart below, arranged in order of highest to lowest return. Equity funds are in green, alternative equity funds are in blue, and balanced funds are in yellow. We can see from the chart above that the equity ETNs have had the best total return performances since Mar. 2015. In fact, the five best-performing funds were all equity ETNs. The notable exception of this class was SMHD, which performed poorly. Distributions Most of the funds have “Monthly Pay” in their title, and therefore these funds pay monthly. BDCL, MLPL and MLPV pay quarterly, while SPLX and HOML are total return funds and so they pay out nothing at all. However, investors should be aware that the monthly payments can be quite lumpy. This is especially true when the majority of the underlying constituents of the fund pay quarterly dividends on the same month. An extreme example is MORL, where the “big month” distributions are approximately 10 times as large as the two “small month” distributions. The yields of the funds are also displayed graphically below, arranged in order of smallest to highest yield. Equity funds are in green, alternative equity funds are in blue, and balanced funds are in yellow. We can see from the graph above that MORL has the highest yield, at 26.52%, while CEFL and BDCL have the second and third-highest yields of 22.04% and 20.24%, respectively. At the other end of the spectrum, RXWL, SDYL and LRET have the lowest yields of 4.99%, 5.43% and 7.45%, respectively. Expense ratios As explained above, the headline expense ratio (or “tracking rate”) stated on the UBS website for the ETRACS products is not the total fee charged by the ETNs. One must delve into the pricing supplement to ascertain the additional “financing spread” charged by the issuer. The sum of the two expense ratios is then added to the 3-month LIBOR (currently 0.31%) to calculate the TER of the funds. Additionally, and as mentioned above, the TER should be divided by two if one wishes to compare the expense ratios of these ETNs to non-leveraged funds. The TERs ( including 3-month LIBOR, currently 0.31%) of the funds is also depicted graphically below, from lowest to highest. The breakdown of the TERs are also shown. In my previous article, I wrote that: Finally, we observe that the TERs of the funds span a wide range of values, from 0.80% to 1.65%, with the somewhat unsettling observation that the more recent funds have been launched with higher expense ratios. That statement turned out to be somewhat prophetic as the two funds launched since my last article, LRET and MLPV, have the highest TERs of 1.96% and 2.26%, respectively (HOML and SMHD, two other recent launches, are tied for second at 1.96%). For LRET, the financing spread is shown in the “pricing supplement”, which can be accessed from the fund website : (click to enlarge) For the newest launch, MLPV, there is no pricing supplement. This was the case for two of UBS’ earliest funds, BDCL and MLPL, who do not possess the veiled financing spread. I was ecstatic. I thought “maybe UBS was reading my articles that shed light on their shenanigans and finally decided to lower their expense ratios for the benefit of their investors.” Alas, I was wrong. Instead of a pricing supplement, the financing spread was detailed, for the first time, in the prospectus supplement, which can be accessed from the fund website . The cynic in me thinks that the reason that UBS moved the financing spread from their pricing supplement to their prospectus supplement is to further obfuscate investors about the presence of said spread. After all, why would someone invest in their new launch MLPV, which charges 2.26% in expense ratio, when they could invest in the similar 2X leveraged MLP ETN MLPL, which charges only 1.16% in fees? However, the unwitting investor would not know about this difference because the headline tracking rate displayed for MLPV (0.95%) is only 0.10% higher than that for MLPL (0.85%). I therefore call on UBS to display all relevant expenses clearly on their fund website instead of in fine print within the pricing or product supplements. Conclusion The 2X leveraged funds allow investors to obtain leveraged participation in traditional equity as well as alternative equity classes such as REITs, mREITs, BDCs, MLPs and CEFs. For the average investor, this leverage can be obtained much more cheaply compared to a margin loan from a broker. For example, for the smallest account size, Charles Schwab (NYSE: SCHW ) charges 8.50%, Fidelity 8.575%, Scottrade 7.75%, Merrill Edge 8.625%. Only Interactive Brokers (NASDAQ: IBKR ) (which I use) offers a competitive margin rate at 1.61% for their smallest accounts. This article also provides an update on the two newest issues, LRET and MLPV. Regrettably, the expense ratios of these two funds are the highest or tied-highest of all the ETNs launched so far. While several of these leveraged ETNs offer sky-high yields, investors need to be aware of the drawbacks of these funds, which include leverage decay (which is somewhat ameliorated by the monthly reset), significant expense ratios and credit risk of the fund sponsor [UBS]. Of course, these risks are on top of the inherent risks of investing in each asset class. For example, MLPs are sensitive to commodity prices while REITs/mREITs are sensitive to interest rates. Interested readers may also consult my recent articles on HDLV and CEFL . Disclosure: I am/we are long CEFL, BDCL, MLPL, MORL, LMLP. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.