Income Growth Advisors, LLC’s Master Limited Partnership (MLP) asset class performance was up 6.11% in May. Our year to date our performance is 18.25% — handily outpacing our two benchmarks.
Year to date, our IGA MLP returns outperformed the Alerian MLP Index by 8.44% and the S&P 500 Index up 13.93%. Since inception 12.31.2000, our MLP performance has annualized 21.61% before management fees. We have outpaced the Alerian Cap Weighted Index by 3.88% per annum and the S&P 500 by 16.79%, since inception. We believe our returns are among the highest in the country based upon the Morningstar SMA database and Evestment database–where we recently posted our returns.
See our performance disclaimer below.
Recent MLP strength is due to a rally in the bond market which is confounding many pundits who expected the “tapering” of Quantitative Easing to lead to higher rates. Further, strength in the domestic exploration and production sector is telegraphing a powerful secular trend in the United States shale boom. (Please note slide 4 of our attached PowerPoint presentation.) One compelling attribute of MLPs is that their growing distributions give them less price sensitivity than bonds in a rising interest rate environment, but are equally price sensitive to bonds in a declining interest rate environment. (MLPs have positive convexity.)
MLPs are an excellent source of tax advantaged income and equity diversification. We recommend using MLPs as a core strategy in retirement planning. (See slide 5 of our attached PowerPoint Presentation.)
MLPs currently yield about 6%. We expect their yields to grow at 7% per year on average in the future. Their distributions are tax advantaged. We recommend investing in MLPs directly through separately managed accounts and not through mutual funds or ETFs whose c-corp tax structure hurt fund holders’ returns.
Sincerely,
Tyson Halsey, CFA
