We have received several inquiries recently about investments in master limited partnerships (MLPs). It seems that, although the popularity of MLPs is growing, many investors still don’t understand exactly what an MLP is or the risks involved in investing in one.
An MLP is a kind of limited partnership that is publicly traded on an exchange. It is similar to any other limited partnership, in that, 1) the limited partners provide the capital to the entity in return for periodic distributions of income; and 2) it is run by a general partner who receives compensation in return for management services rendered.
What are some risks of MLPs?