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Monday, August 02, 2010

Lauricella Spotlights MLP Options

News summary by MFWire's editors

There are a growing number of options for mutual-fund investors wanting in on master limited partnerships but the decision on which path to take leads to different return profiles, according to the Wall street Journal's Tom Lauricella, in today's Fund Fiend column.

According to Lauricella, investors can bet on MLPs via traditional mutual funds, exchange-traded notes, and even exchange-traded funds and the payouts for these limited partnerships averaging around 7 percent of the share price a year, added up to 18 percent annualized over the last decade.

Distributions are usually considered a return of capital, so investors generally don't have to pay taxes until they sell the shares, and at that point, they may owe capital-gains taxes and income tax on past distributions, wrote Lauricella.

However, the tax rules also can require investors to file taxes in every state through which a MLP owns pipeline, which potentially adding upo to dozens of returns and making it difficult to own MLPs in individual retirement accounts. Putting MLPs in mutual-fund-like wrappers solves those problems, but creates others.

The article mentioned SteelPath mutual fund offerings from an offshoot of MLP specialist Alerian and the Alerian MLP ETF, which is in the works from ALPS Advisors

Edited by: Hung Tran


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