11.10.2011
By Terry Flanagan

MLPs Strike a Balance

Both with portfolio managers and investors, master limited partnerships provide the best of both worlds.

In today’s volatile markets, it can be difficult to provide investors with everything they need. The constant risk-on, risk-off nature of the environment may be forcing investors to constantly choose between risk and return.

For Neuberger Berman portfolio manager Doug Rachlin, who manages the The Rachlin Group’s Income Plus Portfolio via a separately managed account platform to high net worth investors, master limited partnerships (MLPs) can provide risk and reward benefits in today’s markets.

MLP’s have distinctive investment characteristics, combining the tax benefits of a limited partnership with the liquidity of publicly traded securities. These entities are mainly limited to only apply to enterprises that engage in certain businesses, mostly pertaining to the use of natural resources, such as petroleum and natural gas extraction and transportation. Some real estate enterprises may also qualify as MLPs. Some well-known MLPs within investment management include noted private equity firm, the Blackstone Group, and Fortress Investment Group.

Neuberger’s Rachlin Group’s Income Plus Portfolio was given honorable mention in the Tiger 21 Survey, a survey conducted by Tiger 21, an investors’ industry group. Chickashaw Capital Management’s MLP Managed Account platform was also given recognition within MLP investing.

Tiger 21 has over 180 Members who collectively manage over $15 billion in investable assets and have been entrepreneurs, inventors and top executives. The group favored Elliott Management Corporation, Alpine Associates, Millennium Management LLC, Ramius Advisors LLC, and Hayman Advisors LP among hedge fund managers.

Perhaps representing the sentiments of the buy side at large, Tiger 21 found that their investment manager member base preferred direct investment in individual stocks—preferred by 50%, followed by equity investments through hedge funds at 27%, exchange traded funds and index Funds at 19%, and mutual funds at only a low 4%.

Rachlin could not be reached for comment by press time.

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