MLP Exposure Minus the Tax Complexities
Energy master limited partnerships have become popular for their high dividend yields. But, says fund manager Quinn Kiley, investing in them as standalone vehicles can create complicated tax situations. He explains how his fund delivers yield, but avoids some of the burdensome tax issues.
Quinn, as I understand it, your main focus is on pipelines and delivery, rather than exploration and production. So can you tell us a little bit about the fund's objective and your investing methodology?
Quinn Kiley: Sure. As you said, we're focused on energy infrastructure, primarily through what are called master limited partnerships, which is a niche of the energy world. They're publicly traded partnerships, and they're a great investment vehicle.
However, there are some tax complications associated with MLPs. This fund that we've launched a couple years ago is focused on more returns through the MLP asset class, but do it without the tax complications.
We're trying to get a relatively high-yield growth component in the returns, a low correlation to other asset classes—it’s a great diversifier—and trying to do it with lower volatility. All through a publicly traded fund that provides a 1099 and solves some of the tax complexities of owning MLPs directly.
Kate Stalter: As you mentioned, this is a fairly new fund, formed back in 2010. What was the reason to form a new fund in the energy space at that time?
Quinn Kiley: Like I said, there are some complications with owning MLPs directly.
And although we have a large business focused on that strategy, we've noticed that there's a whole series of new exchange traded products and new funds that have come out, trying to address the tax complexity of MLPs.