Nevertheless, Quinn Kiley, a co-portfolio manager of Advisory Research Inc., warned that oil prices could fall to a point where production slows dramatically, which would weigh on MLPs.
Additionally, Glickman cautions that MLPs could also see some headwinds ahead in a rising rate environment since MLP yields would be less competitive and borrowing costs would rise. AMJ has a 4.56% 12-month yield and AMLP has a 6.0% 12-month yield.
“Most of the pipelines that are structured as MLPs are seen as yield plays, which means if interest rates go up the MLP yields might become less attractive to investors,” Glickman said. “Also, a lot of MLPs, because they are currently investing so much in pipeline construction, are highly levered, which means the expenses go up if interest rates go up.”
ALPS Alerian MLP ETF
For more information on master limited partnerships, visit our MLPs category.
Max Chen contributed to this article.