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Master Limited Partnerships, or MLPs, are primarily engaged in the transportation, storage, or processing, of natural resources such as crude oil and natural gas. By confining their operations to these specific activities, they are able to trade on public securities exchanges exactly like the shares of a corporation, without entity level income taxation. More than two-thirds trade on the New York Stock Exchange. MLPs are regulated by the Securities Exchange Commission and must file 10-Ks, 10-Qs, and notices of material change like any publicly traded corporation and comply with the recordkeeping and disclosure requirements of the Sarbanes-Oxley Act.
The sector's market capitalization has nearly doubled to $140 billion in the past two years and is expected to double again before the end of the decade. The MLP sector today is on a similar trajectory to REITS in the late 1980s given the strong need for new energy infrastructure investment and the continued migration of existing assets into the MLP structure.
Since 1995, the market capitalization-weighted index of MLPs has generated compound annual returns exceeding 18%, under the radar of the professional investment community. These strong returns were generated through a combination of current yield and consistent annual distribution growth of 8%-9% over the period driven by uniquely attractive business models.
Alerian's industry piece, "Master Limited Partnership Primer: Understanding an Emerging Asset Class", describes the changing dynamics in the energy space today that are shaping the future direction of the MLP sector, as well as a history of the asset class and a basic introduction for new investors in the midstream space. This piece also provides an explanation of the different asset types within the MLP structure and discusses the different aspects of the midstream value chain and the transported products.
  Master Limited Partnership Primer: Understanding an Emerging Asset Class
PricewaterhouseCoopers' MLP User Conference 2006, Las Vegas, Nevada, MLP Market Analysis: Cost of Capital and the Financing Gap November 7, 2006
Alerian Presentation at the 20th Annual Meeting of the Coalition of Publicly Traded Partnerships, June 20, 2006, Washington D.C.
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