This year I have substantially augmented our algorithms and allocation methodology to better reflect the inclusion of Master Limited Partnerships within asset allocation and portfolio construction.
The MLP is a publicly traded partnership formed to own and operate natural resources assets. Suitable assets are stable cash generating assets that qualify under the tax code for certain advantages. Its tax efficient structure eliminates double taxation at the corporate level, and it allows for tax efficient contribution of assets from a sponsor into the MLP. Moreover, it allows a sponsor to contribute assets without relinquishing control through ownership of the partnership’s General Partner. Investors expect an MLP’s asset base to provide a pre-established minimum quarterly cash distribution with some expectations for internal and external growth while recognizing that incentive distributions to the sponsor reduce upside potential.
Contents: Overview of the MLP Structure, History, What is an MLP?, Concept, Creation: Key Criteria, Asset Areas, Typical Investor Questions, General Pros & Cons, Issuer/Sponsor Perspective, Illustrative Term Sheet, Illustrative IPO Valuation, The GP / LP Relationship, Distribution Policy, Tax Example: Cost Basis Illustration, Fees & Incentive Plans: Case Studies, Governance: Case Studies, Typical IPO Timetable