67 WALL STREET, New York - May 20, 2014 - The Wall Street Transcript has just published its Oil & Gas: Master Limited Partnerships Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Increasing Demand for Midstream Assets - U.S. Energy Infrastructure Build Out - Emerging Shale Plays - Outlook for Natural Gas Liquids - Oil and Gas Investing - Shale Production Growth
Companies include: Anadarko Petroleum Corp. (APC), Targa Resources Partners LP (NGLS), Williams Companies, Inc. (WMB), ONEOK Inc. (OKE) and many others.
In the following excerpt from the Oil & Gas: Master Limited Partnerships Report, an experienced MLP asset manager discusses his firm's investing methodology and the outlook for the sector for investors:
TWST: As a starting point, would you introduce our readers to Salient Partners with a bit of history and background of the firm?
Mr. Reid: Salient is one of the largest asset managers in Houston. We have about $19 billion under management in a diversified asset-management business. The business I run is Master Limited Partnerships, which is about $3.5 billion today. We have a large institutional business north of $10 billion, and we have other businesses such as global equity and domestic equity and fixed income, plus we have a liquid alts business that's more focused on mutual funds, to round out the asset base.
TWST: Tell us more about the MLP business that you run. You have several funds focused on that asset class.
Mr. Reid: We do. Salient's MLP business, as I said, is approximately $3.5 billion. If you look at it from a high-level view, roughly $1.5 billion is in public funds. We have two publicly traded closed-end funds on the New York Stock Exchange and two open-end mutual funds that are all focused on MLPs and energy infrastructure.
Then we have about $1.5 billion of separately managed accounts. These are long-only privately managed accounts for both institutions and individual high net worth investors. And then lastly, we have about $500 million in a long/short hedge fund business for both high net worth and institutional investors.
TWST: How would you describe your overall investment approach or philosophy?
Mr. Reid: We have a little longer than an eight-year track record now in the MLP business, which goes back to the creation of the Alerian MLP Index in 2006. I started in January of 2006 with this track record; the index was created in June of 2006, so we've pretty much been in business for the entire length of the index.
The approach has basically been the same for the entire period. That is, we do deep fundamental research on the universe of MLPs and MLP-related companies, and by that I mean we have general partners, MLP affiliates, and some other companies that aren't technically set up as MLPs but are essentially MLP-related companies. Altogether now, what we're talking about is about $650 billion of equity market cap and 125 companies. That's the investable universe as we define it.
What we do is a great deal of in-depth fundamental research on each company. We've built a financial model that attempts to predict the revenues and the net income and the cash flow of these companies, and discount that back to today's price to arrive at a fair value for every company. We have four senior research analysts following 125 companies, so roughly about 30 companies each, and after the conclusion of that whole process, we come up with our recommended list of our top holdings, which are approximately 30 across all of our products. So we are essentially investing in what we believe are the top 30 out of 125 companies...
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.