Why Midstream MLPs?
Historically stable and growing cash distributions, as represented by the Alerian MLP Index.
As of 12/31/15 the Alerian MLP Index had a distribution rate of 8.4%.
Competitive historical track record of total return as represented by the past performance of the Alerian MLP Index. As of 12/31/15, the annualized return of the Alerian MLP Index was 7% over the past 9 years.
Potential to act as an inflation hedge: Historically MLP distribution growth has outpaced inflation. MLPs may have Producer Price Index (“PPI”) escalators built into their contracted pricing models, which may provide predictable growth and an inflation hedge for investors.
Lower correlation to the broad equity market and other asset classes.
Midstream “Toll Collector” fee model allows for investor participation in potential growth of U.S. oil and natural gas industries without business model fundamentals directly correlating to movements in the price of oil and natural gas.
Estimated Continued Expansion: According to a December 2013 study, the IHS, Inc. forecast of oil and gas infrastructure investment over the next 12 years (2014 – 2025) estimates a cumulative spending of $890 billion (in 2012 Dollars), with crude oil and natural gas gathering systems and direct production support facilities receiving the largest share of the investment at 60% of total.
U.S. Domiciled Business: All assets and operations are located in the US and North America.
The Alerian MLP Index is a market-cap weighted, float-adjusted index which tracks the performance of the 50 most prominent energy Master Limited Partnerships (MLPs). One cannot invest in an index.
General Market Risk: Investing in securities is subject to risk, including the possible loss of principal invested. In general, a security’s value is affected by activities specific to the company as well as general market, economic and political conditions.
Risks of investing in MLPs: Investments in MLPs involve risks that differ from a similar investment in equity securities, including but not limited to cash flow risk, tax risk, and risks associated with limited voting rights including a potential conflict of interest between unit holders and an MLP’s general partner. A substantial portion of MLPs are primarily engaged in the energy sector. As a result any negative development affecting that sector, such as regulatory, environmental, commodity pricing or extreme weather risk, may have a greater impact on certain MLPs than other securities not related to the energy sector. MLPs are subject to regulatory and tax risks, including but not limited to changes in current tax law which could result in MLPs being treated as corporations for U.S. federal income tax purposes or the elimination or reduction of MLPs' tax deductions.