DEFA14A: NYLI CBRE Fund Defends Board, Performance Against Activist

NYLI CBRE Global Infrastructure Megatrends Term Fund defends its current board and performance, urging shareholders to reject proposed changes by Saba Capital.

Summary

• The Fund launched in October 2021 during a difficult period for high-yielding infrastructure assets but has maintained an attractive distribution level relative to its peers.
• NAV and market price performance over the trailing 6and 12-month periods has been strong, and the discount to Net Asset Value (NAV) has gradually improved.
• The Fund's limited-term structure is designed to benefit long-term shareholders by providing liquidity at NAV at the end of the term, potentially eliminating any market price discount.
• Total operating expenses and management fees are competitive with peers, with the Total Net Expense Ratio (Excluding Interest Expense) at 1.46% compared to the peer average of 1.47%.
• The Board approved a 15% increase to the Fund's monthly distribution, effective August 31, 2023, with the goal of increasing demand for shares and narrowing the discount to NAV.
• The Fund's NAV distribution rate is 9.6% and its Market Price distribution rate is 10.3%, both higher than the peer averages of 8.0% and 8.2% respectively.
• Over the last 36 months, the Fund's monthly distribution increased by 15%, significantly outpacing the peer average increase of 4%.
• Total Return on NAV as of August 29, 2025, for MEGI was 2.4% (1 Month), 8.1% (3 Month), 16.7% (6 Month), 17.3% (YTD), 20.3% (1 Year), and 28.8% (3 Year), outperforming peer averages across all periods.
• Total Return on Market Price as of August 29, 2025, for MEGI was 0.3% (1 Month), 8.1% (3 Month), 16.9% (6 Month), 20.2% (YTD), 14.6% (1 Year), and 30.0% (3 Year), outperforming peer averages across most periods.
• The discount to NAV improved from -13.78% to -5.87% following the distribution rate increase (as of September 2, 2025).
• The Board's nominees possess decades of experience in senior executive roles and maintain high attendance (~100%) at Board meetings.
• The Board has established various committees for active risk oversight and proactively removed control share provisions from the Fund's organizational documents in 2023.
• The Nominating & Governance Committee adopted a policy not to nominate officers and employees of shareholder groups and, based on this, did not nominate Mr. Kazarian.
• The Board strongly supports a classified board structure and unanimously recommends that shareholders vote AGAINST the Saba Proposal for declassification, noting that only shareholders have the authority to amend the relevant provisions for declassification.
• The filing criticizes Saba Capital's activist initiatives, stating they have adverse consequences for long-term shareholders and are intended to generate short-term profits for Saba.

Sentiment

Score: 8

Explanation: The filing presents a strong defense of the fund's performance, governance, and strategy, highlighting positive financial metrics and proactive measures taken by the Board. It also strongly criticizes activist shareholder tactics, framing them as detrimental to long-term shareholder value, indicating confidence in its current trajectory.

Positives

• Strong NAV and market price performance over trailing 6and 12-month periods, outperforming peer averages across multiple timeframes.
• The discount to NAV has gradually improved, narrowing from -13.78% to -5.87% following the distribution increase.
• A 15% increase to the Fund's monthly distribution was approved, effective August 31, 2023, significantly higher than the 4% peer average increase over 36 months.
• The Fund's limited-term structure is designed to provide liquidity at NAV at the end of the term, potentially eliminating any market price discount.
• Competitive total operating expenses and management fees, with the Total Net Expense Ratio (Excluding Interest Expense) being slightly lower than the peer average.
• Board nominees possess deep expertise, active oversight, and independent governance, with significant closed-end fund and business leadership experience.
• Proactive anti-entrenchment actions, including the removal of control share provisions from the Fund's organizational documents in 2023, ensuring all shares may be voted.
• High attendance (~100%) at Board meetings by incumbent trustees demonstrates active engagement.
• Independent trustees are significantly invested in the NYLI Group of Funds, with two trustees currently invested in MEGI, aligning their interests with shareholders.

Negatives

• The Fund launched in October 2021 during a difficult period for high-yielding infrastructure assets, indicating initial market headwinds.
• The Fund is currently trading at a discount to NAV, although it has improved, suggesting market valuation challenges persist.
• Saba Capital's activist initiatives are presented as having adverse consequences for long-term shareholders, potentially leading to short-term profits for Saba at the expense of others.
• Saba's tactics could disrupt Fund operations, force liquidity events, necessitate negative changes in investment approach, and create negative tax implications.
• The Fund's management fee of 1.00% is slightly higher than the peer average of 0.96%.

Risks

• Saba Capital's activism poses a risk of disrupting traditional board governance and potentially replacing independent trustees with Saba affiliates.
• Proxy fights and public campaigns by activist investors could pressure the Board into conceding to short-term demands that may not align with long-term shareholder interests.
• Activist demands for tender offers, fund mergers, fund liquidations, or conversions to open-end structures could be detrimental to long-term shareholders.
• Leveraging concentrated positions by activist investors could amplify voting power, potentially leading to outcomes not aligned with the broader long-term shareholder base.
• Short-term arbitrage strategies favored by activists may not align with the Fund's goals of long-term performance or stability of income distributions.
• Forced liquidity events could necessitate negative changes in the Fund's investment approach and create negative tax implications, potentially reducing distributions to shareholders.
• There is a potential for NAV erosion if forced tenders occur in unfavorable market conditions.
• The Board does not have the power to declassify itself; only shareholders can amend the relevant provisions, posing a risk if shareholders vote for declassification against the Board's recommendation.

Future Outlook

The Board and Fund management are committed to continued thoughtful actions designed to enhance long-term shareholder value and improve the relationship between the Fund's NAV and its market price. The Fund's limited-term structure is designed to benefit long-term shareholders by providing liquidity at NAV at the end of the term, effectively eliminating any market price discount that may be present.

Management Comments

• "The Board maintains confidence in its ability and the investment manager's ability to deliver attractive total returns and income over the life of the Fund."
• "The Board and Fund management are committed to continued thoughtful actions designed to enhance long-term shareholder value and improve the relationship between the Fund's NAV and its market price."
• "The Board strongly supports a classified board structure and unanimously recommends that shareholders vote AGAINST the Saba Proposal on the WHITE proxy card."
• "The Board monitors the Fund's distributions on a quarterly basis."
• "MEGI's Independent Trustees serve the best interests of all shareholders through sound corporate governance and initiatives designed to enhance the long-term value."

Industry Context

This filing highlights the unique role of closed-end funds and their boards, which function as independent watchdogs overseeing fund managers rather than directing day-to-day operations. It contrasts the long-term income generation goals typically sought by retail investors in closed-end funds with the short-term discount-monetization strategies often employed by activist investors like Saba Capital. The discussion of classified board structures and common oversight across fund complexes provides insight into prevalent governance practices within the investment company industry, emphasizing stability and continuity.

Comparison to Industry Standards

• MEGI's NAV distribution rate of 9.6% and Market Price distribution rate of 10.3% are significantly higher than its peer averages of 8.0% and 8.2% respectively.
• The Fund's monthly distribution increased by 15% over the last 36 months, substantially outperforming the peer average increase of 4% over the same period.
• MEGI's Total Return on NAV and Market Price consistently outperformed its peer group (Aberdeen Global Infrastructure Income Fund, BlackRock Utilities, Infrastructure & Power Opportunities Trust, Cohen & Steers Infrastructure Fund, Duff & Phelps Global Utility Income, Ecofin Sustainable and Social Impact Term Fund, Reaves Utility Income) across 1-month, 3-month, 6-month, YTD, 1-year, and 3-year periods as of August 29, 2025.
• MEGI's management fee of 1.00% is competitive with the peer average of 0.96%, and its Total Net Expense Ratio (Excluding Interest Expense) of 1.46% is slightly lower than the peer average of 1.47%.
• The filing references the ClearBridge Energy Midstream Opportunity Fund (EMO) as an example where Saba Capital's activism and a subsequent tender offer did not lead to a sustained positive impact on the fund's discount to NAV, which widened again after Saba's exit, suggesting Saba's tactics may not provide lasting benefits compared to traditional fund management.

Management Changes

Corporate Governance

Legal Proceedings

• The filing references the case of "Eaton Vance v. Saba Capital Master Fund" in March 2020, where a judge made notable and pointed remarks about Saba's conduct and strategy. The judge viewed Saba's activist agenda as contrary to and inconsistent with the stated investment objectives of the funds, and that Saba's push to monetize discounts conflicted with the funds' goals of stable income generation for long-term investors.

Stakeholder Impact

• **Shareholders**: The Board's actions, such as the distribution increase, limited-term structure, and anti-entrenchment measures, are presented as beneficial for long-term shareholders. Conversely, Saba Capital's activism is portrayed as potentially generating short-term profits for Saba at the expense of long-term shareholders, with risks of reduced distributions and negative tax implications.
• **Fund Management/Investment Team**: The Board expresses confidence in the investment manager's ability to deliver attractive total returns and income, reinforcing stability for the management team.
• **Board of Trustees**: The filing emphasizes the experience, independence, and active oversight of the incumbent trustees, highlighting their commitment to protecting the long-term interests of all shareholders.

Next Steps

• Shareholders are requested to vote on the Board's nominees and against the Saba Proposal for declassification.
• The Board will continue to monitor the Fund's distributions on a quarterly basis.
• The Fund's dedicated investor relations team will continue to actively engage with shareholders and industry analysts through ongoing outreach and quarterly shareholder calls.

Key Dates

Recommendation

The filing presents a robust defense of the fund's current management, strategy, and performance, showcasing competitive returns, attractive distributions, and sound corporate governance. The arguments against activist intervention from Saba Capital are well-articulated, emphasizing the potential for short-term gains for the activist at the expense of long-term shareholder value. While the fund's metrics appear solid and the board's actions proactive, the ongoing proxy contest introduces an element of uncertainty. A 'hold' recommendation is appropriate to allow investors to observe the outcome of the shareholder vote and assess whether the fund can continue its positive trajectory and further narrow the discount to NAV without disruptive activist influence. The fund's strong performance and governance are positive, but the activist pressure warrants caution before a 'buy' recommendation, and the fund's defense prevents a 'sell' recommendation.

Keywords

Closed-end fund, Infrastructure, Megatrends, SEC filing, Proxy statement, Corporate governance, Shareholder activism, Saba Capital, NAV discount, Distribution, Investment performance, Board of Trustees, Financial reporting, Risk management, New York Life Investments