NBXG: Leveraging a Deep Discount in Tech-Heavy Infrastructure to Generate Income in a Rising Rate Environment

In the evolving landscape of income investing, closed-end funds (CEFs) like the Neuberger Berman Next Generation Connectivity Fund (NBXG) offer a compelling blend of arbitrage potential and high-growth sector exposure. As of September 2025, NBXG trades at a -10.08% discount to its net asset value (NAV), a significant spread for a fund focused on next-generation infrastructure and technologyNeuberger Brmn Nxt Gnrtn Cnnctvty:NBXG, [https://www.cefconnect.com/fund/NBXG]^[1]. This discount, coupled with a robust 8.1% dividend yieldNBXG Summary, [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=nbxg]^[2], positions NBXG as a unique opportunity for investors seeking to capitalize on market inefficiencies while generating income in a rising rate environment.

Discount Arbitrage: A Structural Advantage

Closed-end funds often trade at discounts or premiums to their NAV due to market sentiment, liquidity constraints, or investor demand for yield. NBXG's current discount of -10.08%Neuberger Brmn Nxt Gnrtn Cnnctvty:NBXG, [https://www.cefconnect.com/fund/NBXG]^[1] suggests undervaluation relative to its underlying assets, which include a diversified portfolio of 194 holdingsNeuberger Berman Next Generation Connectivity Fund, [https://www.nb.com/en/us/products/closed-end-funds/neuberger-berman-next-generation-connectivity-fund]^[3]. This gap creates an arbitrage opportunity for investors who believe the fund's NAV will converge with its market price over time. Historically, NBXG has maintained an average five-year discount of -15.72%Neuberger Brmn Nxt Gnrtn Cnnctvty:NBXG, [https://www.cefconnect.com/fund/NBXG]^[1], indicating a structural tendency for the market to undervalue its assets—a dynamic that could amplify returns if the discount narrows.

The fund's focus on next-generation connectivity infrastructure—including 5G, AI-driven networks, and data centers—adds another layer of appeal. These sectors are poised to benefit from long-term secular trends, such as the global shift toward digital infrastructure and the proliferation of AI technologiesNeuberger Berman Next Generation Connectivity Fund, [https://www.nb.com/en/us/products/closed-end-funds/neuberger-berman-next-generation-connectivity-fund]^[3]. As noted by Seeking Alpha, NBXG's portfolio includes significant allocations to technology (43.56%) and communication services (20.13%)NBXG Summary, [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=nbxg]^[2], sectors that historically outperform during periods of innovation-driven growth.

Income Generation: Stability Amid Rising Rates

A critical question for income-focused investors is whether NBXG can sustain its $0.10 per share monthly distribution in a rising rate environment. The fund's level distribution policy, which has persisted through recent interest rate hikes from 2020 to 2025Neuberger Berman Next Generation Connectivity Fund, [https://www.nb.com/en/us/products/closed-end-funds/neuberger-berman-next-generation-connectivity-fund]^[3], suggests a disciplined approach to income generation. While the exact composition of distributions (net investment income, return of capital, etc.) will be clarified post-2025 year-endNeuberger Berman Next Generation Connectivity Fund, [https://www.nb.com/en/us/products/closed-end-funds/neuberger-berman-next-generation-connectivity-fund]^[3], the fund's ability to maintain payouts reflects its exposure to high-growth companies with recurring revenue streams.

However, the fund's performance during past rate hikes remains a gray area. Over the past five years, NBXG's five-year annualized total return has been negative (-24.27%)NBXG Summary, [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=nbxg]^[2], a drag attributed to its heavy weighting in high-growth tech stocks, which can underperform during rate-sensitive periods. Yet, its 12-month total return on NAV of 26.87%Neuberger Brmn Nxt Gnrtn Cnnctvty:NBXG, [https://www.cefconnect.com/fund/NBXG]^[1] highlights the potential for recovery as interest rates stabilize or invert. This duality—short-term volatility versus long-term growth—requires investors to balance income stability with sector-specific risks.

Portfolio Resilience: Sector Allocation and Diversification

NBXG's portfolio is structured to mitigate interest rate sensitivity through diversification. While technology (43.56%) and communication services (20.13%) dominateNBXG Summary, [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=nbxg]^[2], allocations to consumer cyclical (12.41%) and financial services (6.04%)NBXG Summary, [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=nbxg]^[2] add defensive characteristics. This mix contrasts with pure-play tech CEFs, which may face sharper headwinds during rate hikes. Furthermore, the fund's global exposure—spanning U.S. and non-U.S. companies—reduces regional concentration risk, a factor that could enhance resilience in fragmented marketsNeuberger Berman Next Generation Connectivity Fund, [https://www.nb.com/en/us/products/closed-end-funds/neuberger-berman-next-generation-connectivity-fund]^[3].

Risks and Considerations

Investors must remain cautious of NBXG's structural risks. Its -10.08% discountNeuberger Brmn Nxt Gnrtn Cnnctvty:NBXG, [https://www.cefconnect.com/fund/NBXG]^[1] could widen if market conditions deteriorate, eroding potential arbitrage gains. Additionally, the fund's non-diversified status and focus on high-growth companies expose it to valuation volatility. While its level distribution policy provides income stability, rising interest rates could pressure the fund's borrowing costs, potentially impacting future payoutsNeuberger Berman Next Generation Connectivity Fund, [https://www.nb.com/en/us/products/closed-end-funds/neuberger-berman-next-generation-connectivity-fund]^[3].

Conclusion: A Strategic Play for Income and Arbitrage

For investors with a medium-term horizon, NBXG represents a strategic opportunity to leverage a deep discount in a tech-heavy infrastructure fund while securing an 8.1% yieldNBXG Summary, [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=nbxg]^[2]. Its sector allocations and growth-oriented portfolio position it to benefit from secular trends in connectivity, while the discount offers a margin of safety for arbitrage-minded investors. However, success hinges on monitoring macroeconomic shifts and the fund's ability to navigate interest rate dynamics—a challenge that could test its long-term appeal.