Gas-backed MLP defies oil price fall

摘要

The reality that US$80-a-barrel oil may be here to stay last week provided a rare setback for tax-advantaged master limited partnerships, with the sector plunging into correction territory before a late-week rally pared losses for the quarter to a still sizeable 6.4%. MLPs were at one point down 13.9% for the quarter, the first 10%-plus move in two years. The fall was exacerbated by hedge funds unwinding a long MLP/short utilities trade that triggered further selling by closed-end funds focused on MLPs adjusting to the suddenly declining equity prices. "MLPs are not incredibly liquid, so selling by a couple of hedge funds can be quite painful," said one MLP banker. "Obviously, there is a supply-demand imbalance in oil, and everyone is waiting to see where this all shakes out."