Fundamental MLP Portfolio Strategy
Fundamental MLP Portfolio Strategy

Fundamental MLP Portfolio Strategy

 
 
 
Summary

The Fundamental MLP Portfolio represents an income-generating portfolio with tax-deferral benefits through investments in MLPs. The team seeks “toll-collector” companies – often found in the midstream segment of the energy sector – that generate cash flow from the transportation, gathering, processing, and storage of hydrocarbons. Non-energy MLPs may also be included.

 
 
Investment Approach
Philosophy

Deliver an income-generating portfolio with tax-deferral benefits through investments in MLPs. 

 
Differentiators
Forensic Accounting for Risk Management

The use of forensic accounting by an independent party – to assess earnings quality, unsustainable trends and potential accounting irregularities – is a feature of the team’s risk management process.

Experienced Management Team

The team has nearly 70 years of collective investment experience and over 10 years in the MLP sector.

Rich Pool of Intellectual Capital

Proprietary research as well as a vast array of internal and external information sources are used to make portfolio decisions.

 
 
 
Investment Process
1
Emphasis on Income

The portfolio looks to invest in securities with high current income, company-specific growth catalysts, and those the team believes have above-average distribution growth prospects. 

2
Focus on the Midstream Segment of the Market

The team seeks “toll-collector” companies – often found in the in the midstream segment of the energy sector – that generate cash flow from the transportation, gathering, processing, and storage of hydrocarbons. Non-energy MLPs may also be included.

3
Stringent Selection Criteria

The team’s selection criteria includes strong free cash flow, attractive valuations, changing internal dynamics, profit margins, market share opportunities, strong management and fee-based revenue.

 
 
Portfolio Managers
Head of Fundamental Equity Advisors Team
34 years industry experience
Managing Director
18 years industry experience
Executive Director
16 years industry experience
 
 
 
 

RISK CONSIDERATIONS  

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.

There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the Portfolio will decline. Accordingly, you can lose money investing in this Portfolio. Please be aware that this Portfolio may be subject to certain additional risks. Fundamental MLP Portfolio is limited to investments in exchange traded Limited Partner and General Partner units and shares of Master Limited Partnerships (MLPs). Investment in MLPs entails different risks, including tax risks, than is the case for other types of investments.

Currently, most MLPs operate in the energy, natural resources or real estate sectors. Investments in MLP interests are subject to the risks generally applicable to companies in these sectors (including commodity pricing risk, supply and demand risk, depletion risk and exploration risk).

Investors in MLPs hold “units” of the MLP (as opposed to a share of corporate stock) and are technically partners in the MLP. Holders of MLP units are also exposed to the risk that they will be required to repay amounts to the MLP that are wrongfully distributed to them. Almost all MLPs have chosen to qualify for partnership tax treatment. Partnerships do not pay U.S. federal income tax at the partnership level. Rather, each partner of a partnership, in computing its U.S. federal income tax liability, must include its allocable share of the partnership’s income, gains, losses, deductions, expenses and credits. A change in current tax law, or a change in the business of a given MLP, could result in an MLP being treated as a corporation for U.S. federal income tax purposes, which would result in such MLP being required to pay U.S. federal income tax on its taxable income. The classification of an MLP as a corporation for U.S. federal income tax purposes would have the effect of reducing the amount of cash available for distribution by the MLP and could cause any such distributions received by the an investor to be taxed as dividend income. If you have any questions about the tax aspects of investing into an MLP, please discuss with your tax advisor.

Investors in MLP portfolios will receive a Schedule K‐1 for each MLP in the portfolio, so they will likely receive numerous Schedule K‐1s. Investors will need to file each Schedule K‐1 with their federal tax return. Also, investors in MLP portfolios may be required to file state income tax returns in states where the MLPs in the portfolio operate. Since some Schedule K‐1s may not be provided until after the due date for the federal or state tax return, investors in MLP portfolios may need to obtain an extension for filing returns. Please discuss with your tax advisor how MLPs will affect your tax return.

Tax laws affecting MLPs may change, and this could impact any tax benefits that may be available through investment in an MLP portfolio. Morgan Stanley does not provide tax advice. The tax information contained herein is general and is not exhaustive by nature. It was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Federal and state tax laws are complex and constantly changing. You should always consult your own legal or tax advisor for information concerning your individual situation.

 

This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations.

There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. Past performance is no guarantee of future results.

A separately managed account may not be suitable for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.

OTHER CONSIDERATIONS

The indexes are unmanaged and do not include any expenses, fees or sales charges. It is not possible to invest directly in an index. Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto.

The Alerian MLP Index is a composite of the 50 most prominent energy master limited partnerships calculated by Standard & Poor's using a float‐adjusted market capitalization methodology. The index is disseminated by the New York Stock Exchange real‐time on a price return basis (NYSE: AMZ).

The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

Morgan Stanley Investment Management is the asset management division of Morgan Stanley.  

 

It is important that users read the Terms of Use before proceeding as it explains certain legal and regulatory restrictions applicable to the dissemination of information pertaining to Morgan Stanley Investment Management's investment products.

The services described on this website may not be available in all jurisdictions or to all persons. For further details, please see our Terms of Use.

Not FDIC Insured—Offer No Bank Guarantee—May Lose Value
Not Insured By Any Federal Government Agency—Not A Deposit

Privacy & Cookies    •    Terms of Use

©  Morgan Stanley. All rights reserved.

Morgan Stanley Distribution, Inc. Member FINRA/SIPC.