The Future Of Master Limited Partnerships

Abstract

Master limited partnerships have grown in size, number, and economic importance over the past fifteen years. They now represent a stable and healthy component of many investment portfolios. MLPs have generated impressive risk-adjusted performance compared to that of other equity investments. This performance is the result of their fee-based, low risk business structure that produces a steady cash distribution to investors. The future to these traditional MLPs and similar new entrants is quite positive. However, new entrants that potentially deviate from this successful operating structure are entering the MLP market. This raises major questions regarding the sustainability of these firms as MLPs. This study examines the future of MLP markets within the context of traditional and non-traditional new entrants. Furthermore, the emergence of institutional investors on MLP markets is discussed.