Figures and Tables

Figures and Tables

The charts and graphs below are some of our most requested and frequently cited. We are happy to make them available for general use by the investing community, whether for personal use in making an investment decision, presenting to clients interested in MLPs, or speaking at a conference. We are thrilled you’ve chosen us as your MLP information provider and respectfully request that Alerian is cited whenever these charts are used. If there is another chart, graph, or statistic that would be helpful and it’s not listed below, please contact us at [email protected], and we’ll do our best to provide you with the information. Please click on the images below to see a larger version that is available for download.
Slide1
  • In any given year, the number of MLP IPOs launched depends on the broader market, investor sentiment, and new businesses eligible for the MLP structure. Of particular note is the lack of IPOs in 1997 and 2009, as well as the resurgence of general partner MLPs in 2006. Variable distribution partnerships reemerged in mid-2011 and still remain a trend. When comparing then and now, the average IPO size was roughly $115 million in 2004, as compared to ten years later when the average IPO size was about $360 million in 2014.

  • Slide2

    In 1995, there were 16 MLPs with a total market cap of $7 billion. The two largest MLPs—propane distributors Ferrellgas Partners (FGP) and AmeriGas Partners (APU)—together comprised 30% of total MLP market cap. During the late 1990s and early 2000s, names that are now large-cap core midstream holdings in most MLP investors’ portfolios went public. These names paved the way for MLP market cap to grow fivefold to $50 billion in 2004. When commodity prices improved in the early/mid-2000s, several E&P and marine transportation MLPs went public. In recent years, with the passage of the JOBS Act and expanded private letter ruling (PLR) interpretations of qualifying income from the IRS, many non-traditional businesses have monetized their assets into the MLP structure, including frac sand, frac water disposal, fertilizer, and refining companies.

    Slide3

  • Both MLPs and REITs are asset classes that grew to prominence after decades of obscurity, but MLPs are about 20 years younger than REITs. REITs were legislated into existence in 1960, and the modern MLP was created by Congress in 1986. Both represent investable asset classes that own tangible, long-lived assets. Both are known for producing relatively higher income; however, REITs must distribute a certain percentage of cash flow, while MLPs have no such requirements. REITs reached $100 billion in market capitalization 35 years after inception. MLPs crossed this threshold only 20 years after inception. In 2014, there were 21 REITs in the S&P 500. MLPs are still prohibited from inclusion.

Slide4

  • The periodic table of performance shows how each relevant sector has performed over the years and how they stack up against each other.

Slide5

  • Distribution growth contributes nearly as much to MLP total returns as the frequently cited MLP yield. Successful MLPs are able to grow their distributions consistently regardless of the macro environment for broader equity markets, energy, or commodities. Even during the financial crisis, through conservative stewardship of capital, most MLPs were able to maintain or grow their distributions. During the 2005-2008 time period, average distribution growth rates of 9%-11% were driven by the number of MLPs which had their IPOs in that period. Smaller companies have a relatively easier time achieving double-digit growth. Since both individual MLPs and the space have grown significantly in the past ten years, expectations going forward should be tempered.

    Slide6

  • Historically, the 10-year median yield spread between MLPs and the 10-year Treasury has been 388 bps, but it has been as high as 1205 bps and as low as 27 bps. However, as the MLP space moves from an emerging to an established asset class, the factors affecting the yield spread continue to evolve. In the years before the financial crisis, MLP distribution growth was at all-time highs and risk premiums decreased across the broader economy, causing the spread to compress to a historical low. During the financial crisis, yield spreads spiked to their highest levels, exacerbated further as levered funds sold positions to meet margin calls. As the economy recovered, additional MLP access products were launched into the marketplace, allowing for greater institutional participation in the space.

    Slide7

  • Prior to 2007, the only available way to invest in MLPs on an exchange (other than directly) was through a closed-end fund. These funds were the first pooled products to compile K-1s and return a Form 1099 to investors. Since then, mutual funds, ETNs, and ETFs have launched, offering investors different objectives and preferences.

  • 8.-Advantages-and-DisadvantagesAs Alerian continually reiterates, for a US taxable investor who is comfortable building a portfolio as well as filing K-1s and state taxes, a direct investment in individual MLPs will always be the most tax efficient way to access the space. When considering an access product, investors are urged to consider fees, tracking, liquidity, leverage, credit risk of the issuer, and tax treatment, among other issues.

  • 9.-Decision-TreeWith a diversity of options available, choosing an MLP investment product can be a difficult process. Please see our Applied MLPs section for further information on the various types of MLP investment products available.

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The accuracy and/or completeness of any Alerian index, any data included therein, or any data from which it is based is not guaranteed by Alerian, and it shall have no liability for any errors, omissions, or interruptions therein. Alerian makes no warranties, express or implied, as to results to be obtained from use of information provided by Alerian and used in this service, and Alerian expressly disclaims all warranties of suitability with respect thereto.
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