Master Limited Partnerships (MLPs) are liquid, publicly traded partnerships which primarily own US energy infrastructure. This includes assets involved in the exploration and production, gathering and processing, and the transportation of oil and natural gas. MLPs were granted preferred tax status in 1986 to facilitate the development of US energy infrastructure assets such as pipelines and storage facilities. These long-lived physical assets with significant barriers to entry generate steady cash flows with low associated business risk. The need for infrastructure development drives ongoing investment, cash flow and distribution growth. PGS expects the continued need for energy infrastructure will provide a multi-decade driver for MLP growth and opportunity.
MLPs provide income seeking investors with a diversified source of income and growth. MLPs have flow-through tax treatment like REITs and stable cash flows that grow over time. Historically, MLP distributions have been relatively high with an attractive tax deferral for US taxable investors. Companies in the sector pay no corporate tax and generally make attractive quarterly distributions competitive with higher yielding bonds. The hybrid nature of these securities gives them the characteristics of equities (traded daily on the NYSE or NASDAQ) where investors have the opportunity to have consistent distributions and growth of those distributions that can serve as something akin to a bond floor during declining markets. Most MLPs have low long-term correlations to energy, commodity, and equity prices.
PGS specializes in providing liquid US energy infrastructure investment strategies through our MLP strategies:
- PGS Energy Opportunities Trust (Cayman)
- PGS Energy Opportunities Fund (UCITS – Ireland) – launched February 19, 2014
- PGS Premier Energy Income Fund (Cayman)(multi-manager)
For further information, please see our MLP Investment Resources.