Master limited partnership investments are experiencing renewed interest as the infrastructure supporting natural gas transportation becomes increasingly critical in today’s evolving energy landscape.
Over the past few years, the MLP sector has strengthened its financial position, according to Rene Reyna, head of thematic and specialty ETF strategy at Invesco. Companies have seen leverage come down and distribution coverage ratios start to improve, positioning the sector for renewed growth.
For investors seeking income and inflation protection in a volatile market, MLPs represent a unique opportunity to access energy infrastructure without direct exposure to oil price swings, Reyna told etf.com.
With 19 MLP ETFs collectively managing more than $18 billion in assets, according to etf.com data, investors have multiple options to gain exposure to this specialized sector.
What distinguishes MLPs from traditional energy stocks is their business model based on charging fees for transporting energy rather than profiting directly from energy prices, Reyna said.
“What’s unique about the space is [its] ability to generate fee-based revenue from transporting or storing energy products without being directly tied to oil and gas price volatility,” Reyna explained.
The most significant driver behind renewed interest in MLPs is the surge in energy demand from artificial intelligence infrastructure, Reyna said.
“We’re realizing that the amount of energy needed to support all the different models that are running for AI, large language models, they’re just very energy intensive, and we don’t have the infrastructure today to satisfy that demand,” he said.
This energy gap has created opportunities for natural gas infrastructure, with Reyna noting that MLPs are “serving as solutions in the near term” for the growing power needs of AI operations.
This increasing demand, coupled with the improved financial health of MLPs, has enhanced their appeal as income-generating investments.
Additional reading: Equity ETFs: An Intro to MLPs
According to Reyna, Invesco’s (IVZ) recently launched SteelPath MLP & Energy Infrastructure ETF (PIPE) currently offers yields around 5%, with distribution coverage ratios at historically strong levels—approximately twice the traditional safety margin for payouts.
Beyond attractive yields, MLPs offer built-in inflation protection through their contract structures and tangible asset base, Reyna said. He emphasized the unique role MLPs can play for investors constructing diversified portfolios.
