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Salient MLP Separately Managed Account Strategy

Overview

Philosophy

The Salient MLP SMA investment philosophy is based on a fundamental “bottom-up” research driven approach designed to construct a portfolio that seeks to maximize risk-adjusted returns while providing our investors exposure to a well-diversified range of midstream energy MLPs and companies.

Strategy

The Salient MLP Separately Managed Account Strategy (SMA) invests primarily in publicly-traded midstream energy Master Limited Partnerships (MLPs) and seeks to identify other higher-quality energy related companies. MLP assets are designed to potentially generate cash flow which is paid out to investors in the form of distributions, the majority of which are typically tax-deferred.1 The strategy is total return oriented and seeks to offer investors both current income and potential capital appreciation.

Process

The team starts with bottom-up research, focused on three critical factors:

  • Stability of the dividend or distribution
  • The 3-5 year estimated growth rate of the dividend or distribution
  • The current valuation relative to our proprietary assessment of the stock’s intrinsic value

Detailed models are built to understand an MLP’s:

  • Cash flow stability
  • Commodity price sensitivity
  • Growth profile
  • Distribution coverage
  • Cost of capital analysis
  • Balance sheet health (leverage profile)
  • Financing needs and other company specific factors

Five basic valuation approaches are used to better understand the security including:

  • Dividend discount models
  • An Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA ) multiple analysis
  • A distributable cash flow multiple analysis
  • Relative yield
  • In special situations, a sum-of-the-parts analysis
Team

Gregory A. Reid

President, Salient MLP Complex
Houston

Ted Gardner, CFA

Managing Director
Houston

Matt Hibbetts

Chief Operating Officer — MLP Investments
Houston

Parag Sanghani, CFA

Director of Research, MLP Complex
Houston

Scott Fogleman

Senior Analyst — MLPs
Houston

Chance Pipitone

Senior Analyst — MLPs
Houston

Dan Hinds, CFA

Senior Analyst — MLPs
Houston

Eddie Rowe

Senior Analyst — MLPs
Houston

Portfolio

Top 10 Holdings (% of Net Assets) as of 08/31/2017

A Enterprise Products Partners, L.P. 11.59
B Energy Transfer Partners, L.P. 7.82
C Energy Transfer Equity, L.P. 6.35
D Shell Midstream Partners, L.P. 6.14
E ONEOK, Inc. 5.37
F Magellan Midstream Partners, L.P. 5.35
G Tallgrass Energy Partners, L.P. 4.91
H Western Gas Equity Partners, L.P. 4.86
I MPLX, L.P. 4.82
J Antero Midstream Partners, L.P. 4.30

These holdings may not reflect the current or future positions in the portfolio.

Sector Allocation (%) as of 08/31/2017

A Natural Gas Pipelines & Storage 48.50
B Liquids Transportation & Storage 25.59
C Gathering & Processing 19.95
D Refinded Products 5.35
E Cash 0.61

These allocations may not reflect the current or future positions in the portfolio. Percentages may not add to 100% due to rounding.

Asset Type Allocation (%) as of 08/31/2017

A MLP 83.50
B Midstream Company 8.50
C MLP Affiliate 4.10
D MLP General Partner* 3.30
E Cash 0.61

* Structured as corporations for US federal taxes
These allocations may not reflect the current or future positions in the portfolio. Percentages may not add to 100% due to rounding.

Related Resources

Investment Advisory Services for the Salient MLP Separately Managed Account Strategy are offered through Salient Capital Advisors, LLC, a subsidiary of Salient Partners, L.P.

1Salient Partners, L.P., and affiliates do not provide tax or legal advice. Please contact your legal and or tax professional to determine how the information contained on this page may apply to your situation.