The Parametric Top 10 Energy MLP strategy is a separate account offering comprised of the 10 most prominent energy master limited partnerships (MLPs).
MLPs are investments that offer a high investment yield and combine the tax benefits of a limited partnership with the liquidity of common stock. An MLP has a partnership structure but issues investment units that trade on an exchange, like common stock. The modern form of MLPs was defined by the Tax Reform Act of 1986 and the Revenue Act of 1987, which outline how companies can structure their operations to realize certain tax benefits and define which companies are eligible. In order to qualify, a firm must earn 90% of its income through activities relating to natural resources, commodities, or real estate. The majority of MLPs traded on the NYSE and NASDAQ operate in the energy industry with a focus on midstream oil and gas infrastructure in the United States.
Held in a separate account, MLPs offer a potential tax advantage since a portion of their payouts can be tax-deferred. MLPs usually specify the percentage of each distribution that is shielded from ordinary income taxes. That percentage may vary from distribution to distribution depending on a variety of factors. MLPs mail individualized K-1 tax forms to each unit holder in late February or early March of each year that specifies the tax treatment of the prior year’s payouts. An investor in this strategy should expect to receive ten or more K-1s each year. Note that taxes may be owed even if the units are held in an IRA. Parametric does not offer tax advice. Potential investors should consult a tax advisor to understand all the tax implications before investing.
Representative Strategy Holdings
|Enterprise Products Partners LP||EPD||Natural Gas Pipelines|
|Kinder Morgan Energy Partners LP||KMP||Refined Products Pipelines|
|Plains All American Pipeline LP||PAA||Crude Oil Pipelines|
|Energy Transfer Partners LP||ETP||Natural Gas Pipelines|
|Magellan Midstream Partners LP||MMP||Refined Products Pipelines|
|Enbridge Energy Partners LP||EEP||Crude Oil Pipelines|
|ONEOK Partners LP||OKS||Natural Gas Pipelines|
|Linn Energy LLC||LINE||Exploration and Production|
|Buckeye Partners LP||BPL||Refined Products Pipelines|
|NuStar Energy LP||NS||Refined Products Pipelines