By Ian Salisbury

Energy-focused closed-end fund Tortoise Energy Infrastructure Corp. offers investors a 12% yield and potential for price growth -- but risks too.

It's turning out to be a stellar year for the $980 million closed-end fund, which trades under the ticker symbol TYG, and focuses on energy pipelines and other infrastructure companies, such as MPLX, Sempra, and Williams Cos. Fund shares boast a total return of 17%, at a time when the broader stock market is down 4%.

The fund is riding a number of tailwinds. One is the trouble in the Middle East, which has boosted oil and natural gas prices. But a bigger factor may be growing AI demand, which has many analysts bullish on the long-term prospects for the power industry, thanks to a rush to build and supply electricity-hungry data centers.

TYG could be comparatively well positioned if the recent surge in oil prices tapers off, as futures markets suggest is probable. While shares of oil producers would likely take an immediate hit, pipeline companies would be somewhat insulated because they operate on long-term contracts with producers. The fact that TYG's shares currently trade at a discount to the fund's net asset value of around 4% could provide investors with an additional cushion.

Of course, double-digit shareholder payouts don't come without risks, and TYG has plenty of those as well. While energy prices are naturally volatile, the fund relies on borrowed money to magnify the already-generous yields it collects from its pipeline and infrastructure stocks. The fund boasts a leverage ratio of 21%, according to Morningstar, which means it invests roughly $121 for every $100 of investors' money.

That naturally contributes to the fund's volatility, and in the past led to a significant black eye. When the energy markets froze up in 2020, TYG was hit hard, ultimately losing more than 70% of its value that year, after demands from lenders forced it to unload assets at the worst possible moment.

In an interview Friday, co-portfolio manager Robert J. Thummel acknowledged the fund's missteps, but said it was much better set up to weather a crisis today.

First, the fund reduced its leverage from over 30% in 2020, to today's 21%. It also diversified away from pipelines into other types of energy infrastructure, such as electricity generation assets -- a move that has also allowed it to benefit from AI growth. Meanwhile the pipeline stocks the fund does own have been busy paying down debt and cleaning up their own financial profiles. "They've improved their balance sheets a lot," he says.

Ultimately, TYG is a tantalizing bet for anyone interested in the long-term bull case for AI energy infrastructure. But don't buy it, expecting a set-it-and-forget-it stream of dividend income.

"TYG is a fund for a specific moment and a specific investor," wrote Michael A. Gayed, author of the Lead-Lag Report Substack, in a report last month. "The risks are equally specific. The leverage that powers TYG's yields produced a 70% drawdown in 2020."

Write to Ian Salisbury at ian.salisbury@barrons.com

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April 03, 2026 14:15 ET (18:15 GMT)

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