Salient Launches Second MLP Mutual Fund

Jun 17 2014 | 1:35pm ET

Houston, Tex.-based Salient Partners, a $19.8 billion asset management firm, has launched a second mutual fund focused on master limited partnerships.

The Salient MLP Fund, which will make quarterly cash distributions to shareholders, will invest at least 80% of its net assets in equity securities of MLPs. The fund may also invest in securities of other energy companies and securities issued by open and closed-end investment companies, including money market funds, actively managed and index exchange-traded funds and exchange-traded notes, U.S. government securities, debt securities, cash and/or other cash equivalents. 

“We believe economic uncertainty and a low interest rate environment have caused an increased interest in yield-oriented securities,” said Gregory A. Reid, Salient partner, managing director and head of its MLP business, in a statement. “Many investors seeking attractive yields, potential inflation protection and distribution growth are turning to MLPs, which have demonstrated a compelling historical performance since 2006.”

Focused on the midstream energy industry, with long-term, fee-based real assets that engage in the transportation and storage of natural resources, the Salient MLP Fund utilizes a C-Corp structure. Salient said it will use leverage—approximately 25% of the value of fund's total assets—to minimize the effects of deferred tax liability accruing on any unrealized gains, realized gains and net income.

The fund is non-diversified, which means that it may invest in a limited number of issuers, and its investment may be in issuers of any market capitalization ranges. Portfolio allocation will be focused in midstream MLPs that principally own and operate assets used in energy logistics.

“The fund’s investment process puts emphasis on seeking cash flow stability, balance sheet strength and management experience,” said Reid. “Daily liquidity, quarterly distributions and 1099 tax reporting are additional attributes of the fund’s investor-friendly structure.”

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