The Benefits of Investing in Master Limited Partnerships

What are the benefits of adding MLPs to an investment portfolio? Yorkville Capital suggests three primary reasons. First, investors increase their diversification by adding an investment with low correlations to other asset classes. Second is the potential for an increase in income as MLPs provide an average distribution above six percent. Finally, MLPs provide growth in distributions of seven percent per year historically.

The U.S. Energy Revolution

The U.S. is set to surpass Russia as the largest energy producer worldwide in 2013, a prospect nearly unimaginable less than ten years ago. A recent report out of the U.S. Department of Energy that the U.S will produce approximately 25 million barrels of oil equivalent per day, which represents an increase of nearly 40% from 2008. This growth is a direct result of exponential production growth out of unconventional shale plays, such as the Bakken in North Dakota and the Eagle Ford in Texas.

Master Limited Partnerships An Asset Class in Growth Mode

For the U.S. to fully capitalize on the economic benefits of the growth in U.S. energy, approximately $300 billion in direct energy infrastructure investment will be needed in the coming years. This infrastructure demand creates opportunity for master limited partnerships (MLPs) in terms of total return and distribution growth.