Advisory Research Inc. is among the leaders in MLP- and energy infrastructure-focused mutual funds. The firm’s MLP & Energy Income Fund (INFRX) and MLP & Energy Infrastructure Fund (MLPPX) have proven popular with investors, so much so that the company has decided to launch a third MLP-focused fund: the Advisory Research MLP & Equity Fund (INFEX).
“This new fund provides the same great access to MLPs and energy infrastructure companies as our flagship open-end MLP Energy & Income Fund, in an equity-only approach,” said Jim Cunnane, Jr., CIO of Advisory Research’s MLP Team and co-portfolio manager of the fund, in a recent announcement.
Equity Focus Reduces Interest Rate Risk
Whereas Advisory Research’s MLP Energy & Income Fund invests in debt securities as well as equities, the new fund steers clear of bonds and other debentures. This offers some insulation from interest-rate risk, which is a particular concern for investors as most agree the Federal Reserve is heading into a tightening cycle.
The fund’s objective is to seek total return. Mr. Cunnane is joined by Quinn T. Kiley, Managing Director and Senior Portfolio Manager of the MLP Team, in the fund’s management. Together, they apply a top-down approach to investment selection, with “an emphasis on less volatile businesses, strategic assets, cleaner balance sheets, and proven management teams.”
Unlike standard corporations, MLPs (“master limited partnerships”) are structured under tax rules that require them to distribute earnings to “unitholders” – the equivalent of shareholders for regular stocks. MLPs receive preferable tax treatment at the business level, and this typically translates into tax savings for individual investors, too, but there are complications. By investing in certain MLP-focused mutual funds like the Advisory Research MLP & Equity Fund, investors can sidestep many of the tax hassles.
Depressed Valuations Creating New Opportunities
The new fund offers “an efficient and convenient way to invest in the MLP and energy infrastructure space; issuing a simple 1099 at year end,” according to Mr. Kiley. “And after a tough year due to weak commodity prices, MLP valuations are as depressed as they have been in 10 years, providing what we believe to be a great investment opportunity.”
MLPs are typically midstream energy companies that generate fee-based income on energy-infrastructure investments, such as oil and gas pipelines. Although the fee-based income partially shields MLPs from commodity price-sensitivity, energy-industry bankruptcies threaten to upend existing revenue agreements. But given the drubbing many MLPs have suffered as oil and gas prices have declined, Advisory Research’s MLP Team thinks the asset class presents opportunity.
Shares of the Advisory Research MLP & Equity Fund are available in A (INFJX), C (INFKX), and I (INFEX) classes, with respective net-expense ratios of 1.35%, 2.10%, and 1.10%. The minimum initial investment for all three share classes is $2,500.
For more information, view the fund’s web page.