Fund to tap into 'renaissance' in domestic energy production.
Investors scouring the world for yield have another option to consider in a sector that's already been hot with new issues.
Goldman Sachs Asset Management launched a new master-limited-partnership fund today to tap into the “economic renaissance” under way in U.S. domestic energy production.
The Goldman Sachs MLP Energy Infrastructure Fund will invest in publicly traded MLPs engaged in midstream energy operations such as storage, gathering and processing, transportation, terminals and pipeline management.
“The energy sector in the U.S. and North America is in the early stages of what could be a multidecade expansion,” said Kyri Loupis, head of the energy and infrastructure team at Goldman Sachs Asset Management and the portfolio manager for the new fund. “With that as a backdrop, the infrastructure required, which is what MLPs are engaged in, will be substantial.”
MLPs have become increasingly popular with investors seeking income in a yield-starved environment. The sector has outperformed the S&P 500 every year since 1999, other than last year, when tax uncertainty related to the fiscal cliff in the fourth quarter contributed to a total return of 4.8%, Mr. Loupis said. And since that uncertainty has cleared somewhat, the sector once again is attracting investors.
The average returns of 28 funds and exchange-traded notes in the MLP sector tracked by Lipper Inc. was up 19.7% through the end of March. The launching of new funds — a much easier structure for retail investors from a tax perspective, is also picking up. Six funds and notes were launched last year, and the Goldman fund will be the fifth so far this year, said Matthew Lemieux, a senior research analyst at Lipper.
“We've seen a lot of interest in the sector since 2010 because investors want exposure to energy without exposure to energy prices,” Mr. Lemieux said. An acceleration of energy-related projects in the U.S. and Canada over the last several years also has been pushing up the value of MLP assets. “A lot of investors foresee this continuing, and it could play well for the MLP market.”
Mr. Loupis currently has about 100 publicly traded MLPs to choose from with his fund and expects that his options will continue to expand. Last year, 14 MLPs came to market, and three have had initial public offerings so far this year. Given that MLPs are owned predominantly by retail investors, Mr. Loupis also thinks the expansion of the investor base to include institutions and a broader swath of retail investors could help drive the market.
“MLPs are still underowned,” he said. “If that changes, it could be another catalyst for the sector.”
