There Are Buyers of Master Limited Partnerships Even in Commodity Sell-off

A fallout of the the crash in on oil prices has been the performance of Master Limited Partnerships (MLPs).  According to the January 11, 2016 issue of Pensions & Investments, the Alerian MLP Total Return index was down 43% from its peak in August 2014.  In the first two weeks of January alone, the Alerian MLP index is down 18%.  Anthony Merhige, general counsel and chief operating officer of Harvest Fund Advisors ($7.5 billion in MLP AUM), and Todd Williams, senior vice president, portfolio manager and senior research analyst of Westwood Holdings Group ($500 million in MLP AUM), are seeing interest from some investors even in this difficult environment.  Valuations have become lower and are attracting institutional investors.

Here are some investors that have made investments in the product in 2015:

• December 2015 - Ohio School Employees Retirement Systems invested $50 million with Harvest Fund Advisors
• December 2015 - Colorado Fire & Police Pension Association invested $25 million with Kayne Anderson Capital Advisors' Midstream MLP fund
• October 2015 - Dallas/Fort Worth International Airport Board invested $15 million with First Trust North American Energy Infrastructure Fund

In addition to the lower prices, institutional investors are buying because of the current yield, potential growth, diversification trends into real assets and the safety net of real asset collateral such as pipelines and storage.  Mr. Merhige believes that MLPs are transitioning from a retail to institutional investor dominated base that is less worried about the short term volatility.  The ten year return of the Alerian MLP index is 8.22% annually.  Adding the yield portion would give an investor a double digit return.

The source for this article can be accessed here.