Monday Mailbag: Methodology Changes

We took a couple of extra days this week on the Monday Mailbag to give everyone time to submit their questions related to Friday’s methodology guide update. Here’s a selection of what came up most often.

Can you tell me what changed in the methodology guides during the most recent update?

October was insane. Both for MLPs and for me. I’m used to sitting behind a couple of computer screens all day long and playing in Excel, Bloomberg, and on government data websites. What can I say? I’m a data nerd, and this is a fantastic job. But another part of my job is making sure that all that research is being made available to investors. So I spent most of October getting off my introverted butt and out on the road answering stakeholder questions. It’s not my natural state, but it’s exceptionally worthwhile, if exhausting.

The exhausted and cranky part of me wants to tell you that I could totally answer your question, but research on learning over the past two decades suggests that engagement is preferable to passive intake of information. If you examine the Constituent Criteria and Index Calculations pages, they are generally the places where changes of greater consequence take place.

While true, that’s not particularly polite. A better answer is that providing only the current methodology guide is consistent with industry practices and Alerian policy. If having access to previous methodology guides is important to you, I would recommend saving the current version on your hard drive.

What do these changes mean for how you will treat the Kinder Morgan restructuring transaction, assuming the vote passes later this month?

It is our policy not to comment on the consequences of methodology changes for individual companies. You can imagine how this would create a slippery slope-induced human resource allocation problem for us, given how many publicly traded partnerships there are today.

When are the October 2014 methodology guide updates effective?

Methodology guide changes are effective immediately. However, this does not mean that the index is rebalanced immediately; it means that the new methodology guides will be used in all future quarterly rebalancings and special rebalancings.

Are common units held by private equity funds classified as non-free float or free float?

It depends. Units owned by persons or entities who are considered to be insiders are excluded in the calculation of free float. Further detail can be found in the Endnotes of our methodology guides.

Are shipping MLPs eligible for inclusion in your infrastructure indices?

Shipping MLPs are currently not eligible for the Alerian MLP Infrastructure Index (AMZI), Alerian Energy Infrastructure Index (AMEI), and the Alerian Natural Gas MLP Index (ANGI). Though some analysts have made the case that marine vessels with long-term charters carrying hydrocarbons are essentially “floating pipelines,” we do not believe that current stakeholder connotation of the word “infrastructure” includes such assets. Language evolves, however, and we will continue to review our criteria to ensure consistency with industry trends.

This post has been edited to include context for the first question.

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