The surge in unconventional oil production will help the U.S. become the largest oil producer in the world. Investors can capitalize on the oil boom through master limited partnership exchange traded funds that track the growing infrastructure network needed to accommodate increasing oil output.
MLPs are businesses that engage in energy infrastructure activities, including the processing, storage and transportation of minerals and natural resources. While MLPs are associated with the energy sector, they have a low correlation to energy prices, along with the broader equities markets, as the assets act like a toll-road in the nation’s energy infrastructure. [What is an ETF? — Part 30: Master Limited Partnerships]
According to the INGAA Foundation, North America will have to invest $251 billion in related infrastructure to keep up with new oil and natural gas discoveries, writes Mary Lyman for The Energy Collective. MLP businesses are expected to invest $25 billion this year to meet the growing shale oil production across the U.S. [Capitalize on the U.S. Oil Boom with Yield-Generating MLP ETFs]
The growth in the MLP marketplace is tied to growing demand for energy and its availability from newly developed sources. Consequently, the asset provides a reliable income source as companies participate in the country’s energy infrastructure.
As a partnership, MLPs act as a pass-through entity where the company’s income or losses pass through to individual owners of the partnership. Most investors enjoy MLPs because of the investment’s attractive quarterly cash distributions.
MLPs are particularly attractive for fixed-income investors since MLPs are required under their partnership agreements to distribute all available operating cash flow each quarter, which produces a reliable stream of income.