YieldCos are typically lowly correlated to traditional equities and do not generate the pesky K-1 tax forms investors in individual MLPs have to deal with every tax season.
“Yieldcos, sometimes referred to as ‘synthetic MLPs,’ are structured to simulate the avoided double-taxation benefit of MLPs and REITs. This means that rather than taxation taking place twice (once at the corporate level and again at the shareholder level), the yieldco is able to pass its untaxed earnings through to investors,” according to the National Renewable Energy Laboratory.
As an asset class, yieldcos currently yield 3.3%, well above U.S. and global equity benchmarks as well as 10-year Treasurys. YLCO charges 0.65% per year.
Chart Courtesy: Global X