NML: A High-Yield, Tax-Efficient Path to Midstream Growth

For income-focused investors seeking exposure to energy infrastructure, the Neuberger Berman Energy Infrastructure and Income Fund (NML) has emerged as a compelling option. Trading at a persistent discount to net asset value (NAV) and offering a robust yield, NML combines the appeal of midstream growth with the tax advantages of a closed-end fund (CEF) structure. However, its corporate tax treatment and high expense ratio introduce nuances that warrant careful analysis.

Yield and Discount: A Dual Attraction

NML currently trades at an 8.47% discount to NAV as of August 28, 2025, a figure that has averaged -9.49% over the past year [1]. This discount, while common for CEFs, creates an immediate value proposition for investors, as it allows them to purchase shares below the fund’s underlying asset value. Simultaneously, the fund’s 8.01% yield—driven by a monthly distribution of $0.0584 per share—positions it as one of the most attractive income vehicles in the energy infrastructure space [1].

The fund’s ability to maintain this yield is underpinned by its focus on energy infrastructure companies, including master limited partnerships (MLPs) and corporations involved in energy storage and transportation [3]. According to its 2023 annual report, NML’s 12-month total return on a NAV basis was 1.71%, though this underperformed its benchmark, the Alerian MLP Index, due to leverage costs and a shift toward renewable energy investments [2].

Tax Efficiency: A Mixed Bag

NML’s structure as a C-corporation simplifies tax reporting for investors, replacing the complex K-1 forms typically associated with MLPs with a standard 1099 form [5]. This is a significant advantage for investors seeking to avoid the administrative burden of MLPs. However, the corporate structure introduces a tax drag: NML is subject to federal income tax on its taxable earnings, reducing the amount available for shareholder distributions [1].

While the fund’s ETF-like liquidity and “enhanced tax efficiency” are marketed as benefits [2], its 13.24% expense ratio—among the highest in the sector—raises questions about net returns [4]. By contrast, MLPs often offer pass-through taxation, which can improve after-tax yields for investors. The exact tax composition of NML’s distributions (e.g., ordinary income, capital gains, or return of capital) will be clarified in early 2026 via Form 1099-DIV [1].

Leverage and Strategy: Navigating Risks

NML employs leverage, with a 17% leverage ratio as of 3Q 2024 [3]. While this amplifies returns in stable environments, rising interest rates have increased borrowing costs, detracting from performance during the reporting period [2]. The fund’s pivot toward renewable energy, though aligned with long-term trends, also diverges from the Alerian MLP Index’s focus, creating additional volatility [2].

Despite these challenges, NML’s 80% minimum allocation to energy infrastructure companies—including MLPs and renewables—ensures a diversified exposure to the sector’s growth drivers [3]. For long-term investors, the fund’s discount to NAV and consistent distribution history may offset its structural inefficiencies.

Risks and Considerations

Investors must weigh NML’s tax drag and high fees against its yield and discount. The fund’s corporate structure, while convenient, may result in lower after-tax returns compared to direct MLP ownership [4]. Additionally, its performance is sensitive to interest rate movements and energy sector cycles, as evidenced by its underperformance relative to the Alerian MLP Index [2].

Conclusion

NML offers a high-yield, tax-simplified pathway to energy infrastructure investing, particularly for those prioritizing income over absolute tax efficiency. Its persistent NAV discount and diversified portfolio make it a compelling option for long-term investors willing to navigate its structural trade-offs. However, due diligence on its tax characteristics and expense ratio is essential to align with individual investment goals.

Source:
[1] NML Summary [https://www.schwab.wallst.com/Prospect/Research/etfs/summary.asp?symbol=nml]
[2] Neuberger Berman Energy Infrastructure and Income Fund Inc. [https://www.sec.gov/Archives/edgar/data/1562051/000089843224000100/ncsr.htm]
[3] NB Energy Infra and Income Fund:NML [https://www.cefconnect.com/fund/NML]
[4] NEUBERGER BERMAN ENERGY INFRASTRUCTURE AND INCOME FUND ANNOUNCES MONTHLY DISTRIBUTION [https://finviz.com/news/153932/neuberger-berman-energy-infrastructure-and-income-fund-announces-monthly-distribution]
[5] NBET | Energy Transition & Infrastructure ETF [https://www.nb.com/en/us/products/etfs/energy-transition-infrastructure-etf]