What is the Best Way to Invest in MLPs .......

DlphcOracl

.......without investing in them.

After filing this year's tax returns I have decided that I am fed up with the endless paperwork associated with buying individual stocks in MLP companies and will not do this again. My question to MFO members:

What is/are the best way(s) to invest in the MLP sector without subjecting myself to the burdensome paperwork that individual MLP stocks involve? Are there mutual funds or CEFs anyone can recommend that will give me significant exposure to this sector without the headache at tax-time?

mrc70

I don't know much about MLPs and invest in them but I know there are ETFs just for them. Google for 'MLP ETFs', and you would find plenty of them.

scott

KMR = Kinder Morgan Management. An investment in Kinder Morgan Partners w/o the K-1.
EEQ = Enbridge Energy Management. An investment in Enbridge Energy Partners w/o the k-1.
LNCO = Linn Co = Investment in Linn Energy w/o the K-1.

The only issue with these management companies - and I believe it's the same with all three is that the dividends are shares only.

----

Enbridge Income Fund (EBGUF.PK) = Canadian "MLP-like" Enbridge offering w/monthly dividend. Withholding tax, but no K-1. Mix of pipeline, oil storage and green energy.

INF = Brookfield Infrastructure Income - Broad infrastructure CEF, but heavily in MLPs. Monthly dividend.
Principal Global Diversified Income - Mutual fund with some exposure to MLPs, as well as a few other income assets (REITs, bonds, etc.)

I get what you're saying regarding MLPs, which is why I really try to limit myself to two or three at most in any one year.

The three management companies (LNCO, EEQ, KMR) are interesting if you're interested in the underlying companies. I own KMR and some KMI.

You could also just consider the parents (KMI instead of KMP/KMR, for example.)

kevindow

I would take a look at one of the Steelpath funds, which were recently acquired by Oppenheimer. We own a position in MLPZX, but I would also look at MLPTX and MLPOX. All of these funds are available with no minimum in Fidelity retirement accounts with a $75 transaction fee for the initial purchase. MLPNX appears to have a prospectus minimum of $1M at Fidelity.

Kevin

Mark

Assuming you're only talking about energy MLP's then add KMI to your short list. I personally don't believe that mutual funds return enough of the generated income to shareholders so I would focus therefore on CEF's. There are plenty to pick from with Kayne Anderson and Tortoise Capital being the big dogs in the house. You might also want to search for MLP's and then by CEF symbols in the M* and Investor Village discussion forums. There's a good collection of knowledgeable investors in both forums.

TSP_Transfer

A little caution to be aware of ,but as the last paragraph states,"What is interesting here is that many of these MLPs have risen since the offerings. Many were also upsized, implying that investor demand remains very strong. With Copano Energy LLC (NASDAQ: CPNO) being acquired for $5 billion or so in units and debt by Kinder Morgan Energy Partners L.P. (NYSE: KMP), investors are eager to get their slice of the pie here for those high payouts and the continued growth of the U.S. energy infrastructure."

Read more: MLPs Raise Mountains of Capital (BWP, CLMT, CMLP, DPM, EPB, EROC, EPD, EXLP, HEP, HFC, LRE, MEMP, MCEP, CPNO, KMP, KYN) - 24/7 Wall St. http://247wallst.com/2013/03/26/mlps-raise-mountains-of-capital-bwp-clmt-cmlp-dpm-epb-eroc-epd-exlp-hep-hfc-lre-memp-mcep-cpno-kmp-kyn/#ixzz2Oi0cW6LK

And more growth ,if and when,any of these permits are issued for the growth of export facilities across North America.JOBS ANYONE?
http://ferc.gov/industries/gas/indus-act/lng/LNG-proposed-potential.pdf
Huh??
http://uk.reuters.com/article/2013/03/22/ferc-enbridge-sandpiper-idUKL1N0CE9LU20130322

Investor

Reply to @kevindow: what is the point of investing in them if your fund is organized as c-corp and paying pretty heft corporate taxes and eating up a huge part of the returns even if you hold it in an IRA. So, there is double taxation issue as well. All this to avoid K-1.

I would rather not invest in MLPs unless the taxation has changed or do it but buy individual MLP and deal with paperwork or hire a tax preparer.

STB65

KMR has done well for me in an IRA, where it's allowed, and M* likes it. MLPAX has had a big jump lately, but it earned about 25% over the first 3 years (30% now) and is allowed in IRA's and was designed to avoid the tax paperwork. So far, I haven't heard otherwise.

scott

Interesting chart for KMR - held around the 20 day MA for about a month and a half/two mo, then the MACD turn and stock breaks higher at that point.

http://stockcharts.com/h-sc/ui?s=KMR&p=D&b=5&g=0&id=p15844008429

scott

Reply to @TSP_Transfer: Kinder is working with Shell to export (http://online.wsj.com/article/SB10001424127887323829504578269643551960004.html)

TSP_Transfer

Lots of interesting comments also attached to this article.The tax implications certainly are not simple or easily understood.But more opportunities arise daily as the MLPs raise more cash and shipping companies, Golar LNG Partners LP(NASDAQ:GMLP and oil/gas field support services add additional options. Compressco Partners, L.P. (NASDAQ: GSJK)
http://seekingalpha.com/article/1300561-mlps-a-reality-check?source=email_investing_income&ifp=0

kevindow

Reply to @Investor:
Sorry, I just now noticed your response. Right now I own only a foothold in MLPZX, and I would not own it just to avoid a K-1. I would own it for a convenient exposure to a high-yielding, decently performing asset class which is poorly correlated with most asset classes. Currently I am using AQRIX and PGDIX as diversifiers.

Kevin

TSP_Transfer

Reply to @scott: From what I've read recently on this forum and elsewhere, their is and will be an immense demand for the unconventional shale oil/gas production and proven reserves being developed in our country and Canada.How we get that production to market is an ongoing process that unfortunately is lengthy and sometimes very political.Can anyone imagine developing a Sovereign Fund from these potential richs as Norway and some of the Middle Eastern kingdoms have done over the past 40 years? Who would be first in line,Detroit or the states of Illinois or California? Anyways it should give the THINKERS (elites?) at the big think tanks something to envision.
http://seekingalpha.com/article/1234891-shale-gas-revolution-top-promising-lng-export-investments

BobC

Rather than own individual MLPs or even MLP funds/etfs, we like owning a more diversified fund in which MLPs make up a significant portion of the holdings. We have researched, interviewed, and are now using Goldman Sachs Rising Dividend GSRLX. It owns about 20% in MLPs, and co-manager Troy Shaver's background gives us a lot of reassurance this fund understands MLPs as well as any. We expect to be capturing gains from other dividend-based equity funds/etfs and moving these dollars to GSRLX. We think we can get our MLP fix, without all the tax ramifications and risks of owning just MLPs in a logical and reliable structure.

bee

Maybe not a MLP play, but this fund invests in the gas utility arena...GASFX. It's getting a real boost from NG's recent move up but it has a nice dividend and reasonable ER. FBR recently sold its funds to Hennessey. I jumped out at that point, but may ease back in.

Mark

Reply to @BobC: Bob, I don't expect you to go looking for it but I'm not seeing the 20% MLP allocation in their holdings as of Dec. 31, 2012. In fact by sector they only hold 18.6% in energy. Granted MLP's exist elsewhere but I don't see those in the portfolio either. Guess I will have to wait for 1st quarter data (and my winning Powerball ticket).

BobC

Reply to @Mark: Hi Mark. According to the most recent information I have, 19% of GSRLX is in energy, with 12 positions: Sunoco Logistics, Western Gas, Williams Partners, Enerptise Products, Energy Transfer, El Paso Pipeline, Markwest, Plains All America, Magellan Midstream, Linn Energy, and Oneok, all LPs

Mark

Reply to @BobC: Well thank you sir, that'll do it. I could have searched a little harder I suppose but I wasn't seeing it on their website or at M* (no surprise there). Next time, strait to Edgar. Happy Easter.

ron

At one time I owned a steelpath fund but sold it when I was not satisfied with my experience with management. At this time I only own a diversified MLP fund managed by legg Mason, CEM


With a track record of a little over two years, ClearBridge Energy MLP CEM is a Bronze-rated fund, in our estimation. Although there are four portfolio managers, we believe that Chris Eades is the primary portfolio manager, given his past history as a sell-side energy analyst and as an energy hedge fund manager. We like the fund's parent, investment process, and early track record. A higher rating is possible as the performance history builds.

I only own it in a taxable account to have the benefits of taxation and no K-1.