May 18,
2021
Via Email
Brian McGrady
MainStay CBRE Global Infrastructure Megatrends Fund
51 Madison Avenue
New York, NY 10010
MainStay CBRE Global Infrastructure Megatrends Fund (the Fund
)
Initial Registration Statement on Form N-2
File Nos. 333-255283 and 811-23654
Dear Mr. McGrady,
On April 16, 2021, the MainStay CBRE Global Infrastructure Megatrends
Fund (the
Fund ) filed a registration statement on Form N-2 under the Securities Act
of 1933 ( Securities
Act ) and the Investment Company Act of 1940 ( 1940 Act ). We have
reviewed the filing and
have the following comments. All capitalized terms not otherwise defined herein
have the
meaning given to them in the registration statement.
General
1. We note that the registration statement is missing information and contains
bracketed
disclosures. We may have additional comments on such portions when you
complete them in
a pre-effective amendment, on disclosures made in response to this letter,
on information
supplied supplementally, or on exhibits filed in any pre-effective
amendment. Please plan
accordingly.
2. Please advise us if you have submitted or expect to submit any exemptive
applications or no-
action requests in connection with your registration statement.
3. Where a comment is made with regard to disclosure in one location, it is
applicable to all
similar disclosure appearing elsewhere in the registration statement.
4. Prior to seeking effectiveness, please confirm that FINRA has reviewed the
proposed
underwriting terms and arrangements for the offering, including the amount
of compensation
to be allowed or paid to the underwriters and any other arrangements among
the Fund, the
underwriter, and other broker dealers participating in the distribution, and
that FINRA has
issued a statement expressing no objections to the compensation and other
arrangements.
5. Please tell us if you have presented or will present any test the waters
materials to potential
investors in connection with the offering. If so, please provide us with
copies of such
materials.
Brian McGrady
May 18, 2021
Page 2 of 10
PROSPECTUS
Prospectus Cover Page
6. Please streamline the description of the Investment Strategies. The
cover page need only
identify the type of fund or a brief description of the Fund's investment
objective(s). See
Item 1.1. of Form N-2.
Investment Strategies
7. Please delete from the definition of infrastructure company, companies that
provide services
to companies engaged in the ownership, management, development,
construction,
renovation, enhancement, or operation of infrastructure assets, or explain
how including
such service providers as infrastructure companies complies with the
reasonable definition
requirement of Rule 35d-1.
Limited Term
8. Based on the disclosure that the Termination Date, may be extended one or
more times by
the Board of Trustees prior to the first business day of the sixth month
before the next
occurring Extended Termination Date, the Board appears to be able to
extend the original
Termination Date by up to two years and then for additional six-month
periods in perpetuity,
thereby, providing for the Fund s perpetual existence. If this is the
case, please note that a
limited term fund would be expected to terminate or provide shareholders an
appropriate exit
mechanism at the end of the term. The staff has generally not objected to a
limited extension
based on a Board's determination that market conditions warranted extension
of the original
termination date. However, an extension of up to two years does not seem
consistent with
the disclosure in the prospectus that that Board will make such a
determination based on
prevailing market conditions. Prevailing market conditions are
inherently short term. How
can the Board know what will be the prevailing market conditions two years
from the
decision to extend the original Termination Date? Moreover, how is the Board
s ability
extend the Fund s existence for six months periods in perpetuity or merge
or consolidate with
another entity consistent with the notion of a limited term fund? Please
revise the
Declaration of Trust and this disclosure throughout consistent with this
comment or explain
why changes based on these comments should not be made.
Further, we note that the Board could determine to conduct a tender offer
to purchase 100%
of the Fund's outstanding shares and cause the Fund to have a perpetual
existence after the
completion of an Eligible Tender Offer. Please explain how the Fund can
convert to a
perpetual existence if all the Fund's shares are purchased? Is there a
minimum amount of net
assets that must remain in the Fund after the completion of the Eligible
Tender Offer to
ensure the continued viability of the Fund (a Termination Threshold )?
If so, please revise
Brian McGrady
May 18, 2021
Page 3 of 10
the disclosure throughout to state the Termination Threshold and explain
what will happen
with the Eligible Tender Offer and the Fund depending on whether or not the
Termination
Threshold is met.
We also note that the disclosure states that the expiration date [of the
Eligible Tender Offer]
shall be as of a date within twelve months preceding the Termination Date.
Please
supplementally explain whether the Eligible Tender Offer must be completed
prior to the
original Termination Date or whether the reference to Termination Date
also refers to any
Extended Termination Date. If the latter, please clarify the disclosure and
explain how this
would work (e.g., when would the board determine the Extended Termination
Date vis a via
the timing of the expiration of the tender offer). If any Eligible Tender
Offer must be
completed prior to the original Termination Date and the Board determines
to extend the
Termination Date, please add disclosure throughout that the Fund does not
intend to conduct
an Eligible Tender Offer after the original Termination Date and disclose
the options
available to shareholders for exiting the Fund after the original
Termination Date.
Please also disclose, where appropriate, that the Adviser may have a
potential conflict of
interest in seeking to convert the Fund to a perpetual trust and in
recommending any
extension of the original Termination Date.
Finally, please disclose, where appropriate, who will pay the costs and
expenses associated
with conducting a tender offer, regardless of whether a tender offer is
consummated.
Distribution
9. Please relocate the disclosure regarding Rule 481(e) Dealer Prospectus
Delivery Obligations
to the back cover page. See Item 2.3 of Form N-2.
Prospectus Summary (pp. 1-22)
General
10. We note that the Prospectus summary is 22 pages long. The summary should
provide a clear
and concise description of the key features of the offering and the Fund,
with cross references
to relevant disclosures elsewhere in the Prospectus or Statement of
Additional Information.
We note that the disclosure in the summary is essentially a duplicate of
disclosure that
appears later in the prospectus. Please revise (e.g., consider shortening
the descriptions of
principal portfolio investments and investment risks which are 3 and 17
pages long,
respectively, and eliminating repetitive disclosure). See Instruction to
Item 3.2 of Form N-2.
Brian McGrady
May 18, 2021
Page 4 of 10
Leverage
11. The disclosure states that although it has no current intention to do
so, the Fund may also
employ leverage by issuing preferred shares or by investing in derivative
instruments that
have the economic effect of leverage. Please clarify whether in fact the
quoted disclosure is
applicable to derivative instruments, given the disclosure elsewhere in the
prospectus
regarding the fund s investments in derivatives.
12. Please explain in plain English the term Effective Leverage.
13. The disclosure notes that the management and subadvisory fees payable to
the Manager and
Subadvisor, respectively, will be higher when leverage is utilized and that
this will create a
conflict of interest between the Manager and Subadvisor, on the one hand,
and the holders of
the common shares, on the other hand. Please disclose how this conflict
will be managed.
Summary of Fund expenses (pp 24-25)
14. Disclosure on page 30 states that the Fund may invest in other investment
companies,
including mutual funds, closed-end funds, and ETFs. Unless the Fund
anticipates that the
indirect expenses from such investments will be less than one basis point,
please add a
caption for acquired fund fees and expenses ( AFFE ) and reflect such
fees in the expense
table.
15. With respect to footnotes one, two and three, please also state, if true,
that the Fund is not
obligated to repay these items of fees, compensation or expenses.
Use of Proceeds (p. 25)
16. If the Fund expects to take longer than three months to invest all net
proceeds, please state
the reasons for the expected delay. Please note that it should not take
longer than six months
to invest all proceeds.
Investment objective and Investment Strategies and Policies (pp. 25-31)
17. Please note that the comments set forth below also apply to the same or
similar disclosure in
the summary, subject to our earlier comment that the summary should be
revised to include
only the key features about the offering and the Fund.
Investment Strategies and Policies
18. Please disclose, if true, that the Fund will invest in equity securities
issued by companies of
any market capitalization.
Brian McGrady
May 18, 2021
Page 5 of 10
19. Please specify the types of fixed income securities the Fund will invest
in. Please also
disclose whether the Fund has any criteria as to credit quality, maturity
or duration.
20. Please provide an explanation of "contracted renewable power assets."
21. Please describe the United Nation s Sustainable Development Goals and how
they are used
in the investment process.
22. The disclosure states, Generally, an issuer of a security is considered
to be U.S. or foreign
based on the issuer s country of risk, as determined by a
third-party service provider such
as Bloomberg. Please delete the term generally or specify when
country of risk is not
used. Please also specify the criteria used by a third-party service
provider to determine
country of risk.
Market Opportunity
23. Please disclose why alignment with the United Nation's Sustainability
Development Goals
will help drive investment returns in the Fund's investment in companies
focused within the
stated infrastructure megatrends (e.g., will the U.N. fund implementation
of these goals or
provide any subsidized incentives for companies to achieve these goals?).
Investment Process
24. According to the disclosure, as part of its selection process, the
Subadvisor examines "several
risk factors." Later, the disclosure states that the Subadvisor assesses
ESG factors as one of
"seven company specific risk factors." Please reconcile the number of
factors relied upon by
the Subadvisor. Please also identify and explain each risk factor that is
used in the selection
process.
25. Please provide more details about the Subadvisor s model and how it is
used by the
Subadvisor to determine what companies are selected for investment.
26. As the Subadvisor does not appear to rely on ESG as the exclusive factor
considered in
making its investment decision, please state, if accurate, than an
investment could be made in
a company that scores poorly on ESG if it scores strongly on other non-ESG
factors that are
considered.
27. While the Fund does not identify itself as an ESG fund, the Subadvisor
assesses ESG factors,
among other factors, in its investment decision-making process. We have the
following
comments relating to the Subadvisor s ESG research process:
Brian McGrady
May 18, 2021
Page 6 of 10
a. ESG refers to a broad range of potential investments and issues.
Please disclose how
the Fund defines ESG as part of its own investment process and
whether it intends to
focus on any particular factor or factors.
b. Please briefly describe the research from an independent global
provider of ESG and
corporate governance research and describe the criteria the
Subadvisor uses in
assessing the information available from such sources, consistent
with its chosen ESG
definition/focus.
28. In the first sentence of the last paragraph in this section, the Fund notes
that it has adopted a
policy that it will, under normal circumstances, invest at least 80% of the
value of its assets
in investments of the type suggested by its name. Please state the actual
policy (i.e., in
securities issued by infrastructure companies ).
Portfolio Composition
29. We note that "Derivative Transactions" in the "Risk Factors" section
states, "Derivative
transactions, or derivatives, may include options, forwards, futures,
options on futures and
swap agreements." If the Fund will invest in such instruments as part of
its principal
investment strategy, please identify the specific investments in the
principal strategy and add
appropriate risk disclosure. If the fund will not invest in derivatives as
part of its principal
strategies, please move the risk to a discussion of non-principal risks in
the prospectus or
SAI.
Leverage (pp 32-34)
30. Please supplementally advise whether the Fund will continue to use leverage
during the
wind-down period prior to the Termination Date and, if so, why it would be
appropriate to do
so.
Risk Factors (pp. 35-51)
31. Additional disclosure in response to the comments below should generally be
included here
in the Risk Factors section. The Risks section in the
prospectus summary should be
revised for brevity, consistent with our comment to shorten the disclosure.
32. Please include a risk factor for Model Risk describing the principal
risks associated with
the Subadvisor's valuation model.
33. Limited Term Risk. Please address the risks related to a potential tender
offer.
Brian McGrady
May 18, 2021
Page 7 of 10
34. Infrastructure Industry Risk. According to the disclosure, "Infrastructure
Industry Risk"
includes risks associated with "social infrastructure companies." If the
Fund will invest in
"social infrastructure companies" as part of its principal investment
strategy, please revise the
section "Investment Strategies and Policies" accordingly. Please also
explain what a social
infrastructure company is.
35. Concentration Risk. Please tailor the "concentration risk" disclosure
specifically to the
infrastructure industry or group of industries.
36. Foreign Securities Risk. Please reconcile the first sentence with other
disclosure in the filing
that the Fund uses country of risk in determining the issuing country
of a security. In
addition, please add more fulsome disclosure about the risks noted.
37. Emerging Markets Risk.
a. Please disclose the risks related to market manipulation concerns and
any limitations on
the rights and remedies available to the Fund, individually or in
combination with other
shareholders, against portfolio companies. See ADI 2020-11 Registered
Funds Risk
Disclosure Regarding Investments in Emerging Markets.
b. If the Fund expects to invest in Chinese issuers, please address China
risk in this section.
38. Convertible Securities Risk. We note that the Fund invests in convertible
securities. If the
Fund invests or expects to invest in contingent convertible securities (
CoCos ), the Fund
should consider what, if any, disclosure is appropriate. The type and
location of disclosure
will depend on, among other things, the extent to which the Fund invests in
CoCos, and the
characteristics of the CoCos, (e.g., the credit quality, the conversion
triggers). For example,
if CoCos will be a principal type of investment, the Fund should provide a
description of
them and appropriate risk disclosure in response to Item 8.2.
39. MLP Risk. If the Fund will invest in general partnership interests, please
disclose any
additional risks that the Fund will be subject to as a result of its
investments in such interests,
including general partner liability.
40. Debt Securities Risk. Please include an example of duration (e.g., a
duration of three
means that a security s price would be expected to decrease by
approximately 3% with a 1%
increase in interest rates).
41. Leverage Risk. Please cross-reference the disclosure later in the
prospectus as to asset
coverage ratios and other requirements under the 1940 Act with respect to
borrowings,
issuance of preferred shares and investments in derivatives.
Brian McGrady
May 18, 2021
Page 8 of 10
42. Portfolio Turnover Risk. Please disclose in the "Investment Strategies and
Policies" section,
if true, that the Fund may engage in active and frequent trading as part of
the Fund's principal
strategy or explain why Portfolio Turnover Risk is included as a principal
risk of the fund.
Management of the Fund (52-55)
43. Under Portfolio Managers, please state that the listed personnel are
primarily responsible
for the day-to-day management of the Fund s portfolio. See Item 9.1.c. of
Form N-2.
Dividend Reinvestment Plan (pp 56-59)
44. Please explain why the Fund may issue new shares when the Fund's NAV is
greater than
market price, rather than buying shares on the open market.
Description of capital structure (pp 59-60)
Preferred Shares and Other Securities
45. Please revise the last sentence of the first paragraph on page 60 to be
consistent with other
disclosure (e.g., At times, the dividend rate as redetermined on the
Fund s preferred shares
plus the expenses of issuance . . . . )
Credit Facility
46. The disclosure includes a general discussion of the material restrictions
that the Fund would
expect in entering into a credit facility. Please let us know if the terms
of the Credit Facility
are expected to be finalized before the requested date of acceleration. If
so, please update
this disclosure in a pre-effective amendment to address the actual
restrictions and material
terms of the credit facility. Please also file the executed credit facility
as an exhibit to the
registration statement.
Certain provisions in the declaration of trust and by-laws (pp. 61-64)
47. Under the heading, "Certain provisions in the declaration of trust," the
disclosure states, "The
information contained under this heading is only a summary and is subject
to the provisions
contained in the Fund s Declaration of Trust and By-Laws and applicable
laws, which are on
file with the SEC." We note that the Prospectus disclosure should fully
cover the disclosure
requirements of Items 10.1.a. and f. of Form N-2. Please remove the portion
of the statement
that appears to qualify the summary by reference to the Fund s
organizational documents.
Brian McGrady
May 18, 2021
Page 9 of 10
Control Share Acquisitions
48. According to the disclosure, the Fund s By-laws provide for restrictions
on acquisition of
control shares. We note that the Fund is a Delaware statutory trust and
that Delaware has not
adopted a control share acquisition statute. Please supplementally explain
the legal basis for
including these provisions in the Fund s By-laws.
Other
49. Please revise the name of the heading entitled "Other" or include a new
section entitled
"Change of Control Provisions" or "Anti-Takeover Provisions."
50. Consider disclosing that preferred shares could also be used as an
anti-takeover device.
Limited Term and Eligible Tender Offer
51. We note there is no disclosure of how the Fund will operate during the
wind-down period
prior to the Termination Date. Please add such disclosure where
appropriate, in the
prospectus.
Underwriting
52. Please clarify that Investors purchasing Shares in this offering will not
be charged a sales
load.
53. According to the disclosure, the Fund, among others, will indemnify the
Underwriters or
contribute to losses arising out of certain liabilities. Please briefly
describe these
indemnification provisions. See Item 5.4 of Form N-2.
STATEMENT OF ADDITIONAL INFORMATION
Fundamental Investment Limitations
54. The qualification in the Fund s concentration policy that it will in
normal circumstances
invest more than 25% of the value of its total assets at the time of
purchase in the securities
of issuers conducting their business activities in the infrastructure group
of industries allows
freedom of action to concentrate or not concentrate pursuant to management
s discretion,
without shareholder approval. This has been considered by the staff to be
prohibited by
Sections 8(b)(1) and 13(a)(3) of the 1940 Act, unless the statement of
investment policy
clearly indicates when and under what specific conditions any changes in
the concentration
policy would be made. Please delete this qualification or describe with
specificity when and
under what conditions any changes between concentration and
non-concentration would be
Brian McGrady
May 18, 2021
Page 10 of 10
made. Please make corresponding changes to other statements of the Fund s
concentration
policy in the prospectus and SAI.
Custodian, Transfer Agent and Sub-Administrator
55. Please disclose the custodial arrangements for the Fund s foreign
securities. See Item 20.6 of
Form N-2 and Guidelines to Form N-2, Guide 9.
PART C: OTHER INFORMATION
56. Please file the actual agreements, rather than "form of" agreements, for
the Custody
Agreement, Transfer Agency and Service Agreement, and Fund Administration
and
Accounting Service Agreement.
* * * *
A response to this letter should be in the form of a pre-effective
amendment filed
pursuant to Rule 472 under the Securities Act. The pre-effective amendment
should be
accompanied by a supplemental letter that includes your responses to each of
these comments.
Where no change will be made in the filing in response to a comment, please
indicate this fact in
your supplemental letter and briefly state the basis for your position.
We remind you that the Fund and its management are responsible for the
accuracy and
adequacy of their disclosures, notwithstanding any review, comments, action, or
absence of
action by the staff.
You may contact me at (202) 551-6765 or cowanm@sec.gov if you have any
questions.
Sincerely,
/s/ Mark Cowan
Senior Counsel
cc: Andrea Ottomanelli Magovern, Assistant Director
Sally Samuel, Branch Chief