After the broader markets pulled back on mounting speculation that the Fed will ease back on its bond-purchasing program and rising rates, Credit Suisse believes that it is now a perfect entry point into MLP assets, writes Aaron Levitt for Investopedia.
According to Credit Suisse research, MLPs will still outperform in a rising rate environment. For instance, between mid-2004 and mid-2007, MLPs outpaced both the S&P 500 and yield-oriented asset classes, such as utilities and bonds.
Looking ahead, Credit Suisse also anticipates further growth in the industry, supported by rising energy production across the U.S. and increased demand for energy-related infrastructure.
The U.S. is pulling out more oil than it has since 1991 and more natural gas than it has in its 100-year history, especially with increased “fracking” operations, writes Aimee Duffy for DailyFiance. This increased supply is dependent on midstream infrastructure.
Nevertheless, different MLPs will have varying levels of debt-to-equity and floating rate debt, both of which are more susceptible to rising interest rates. With an exchange traded fund, investors can help diverse risk through holding a basket of MLPs.
Source: Tom Lydon, ETF Trends
Exchange Traded Fund Global X MLP (MLPA) is a component of the D2 Capital Management Multi-Asset Income Portfolio.
The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.
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