Anatomy of Master Limited Partnerships——

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

Author: Sameer_Jain

Partner. Sameer Jain is founder of FinTech, the world’s first portal that seamlessly integrates traditional, illiquid and alternative investments within portfolios. Prior to this he was Chief Economist & Managing Director at AR Capital. Before that he headed Investment Content & Strategy at UBS Alternative Investments. At UBS, he served as a non-voting member of the Wealth Management Research investment committee, and as a capital allocator was responsible for all illiquid investing including fund manager selection and due diligence across the platform. Prior to UBS he headed product development & investment research at Citigroup Alternative Investments that managed over $75 billion of alternative investments across hedge funds, managed futures, private equity, credit structures, infrastructure and real estate. Here he led a team that developed proprietary models for portfolio strategy and asset allocation with alternative investments, provided investment support and research to pension plans, sovereign wealth funds, endowments as well as internal clients including Citi Private Bank. Before this he was with Cambridge Alternative Investments and SunGard (System Access) where he travelled to over 80 countries for work across Europe, Asia, Middle-East and Africa. He has written over 30 academic and practitioner articles on alternative investments with thousands of downloads at SSRN, presented at over a hundred industry conferences and has coauthored a book, Active Equity Management. Mr. Jain has multiple degrees in engineering, management, public administration and policy and is a graduate of Massachusetts Institute of Technology and Harvard University. He is a recipient of the Alfred Sloan Fellowship and subsequently was a Fellow of Public Policy and Management at the Harvard Kennedy School of Government for a year. He holds Series 7 and 66 securities licenses.

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