How do you invest in American oil pension funds, and what are they really called?


Quick Answer

American Oil Pension, or A.O.P, is an investment fund managed by Stansberry and Associates, explains The Growth Stock Wire. The fund invests in publicly traded pipeline corporations that are registered as Master Limited Partnerships, or MLPs.

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Full Answer

Categorized as unconventional equities by Morningstar, MLPs are the end product of a restructuring conducted by a significant number of energy firms in the United States. The restructuring targeted operations such as storage terminals and pipelines that were stable but growing slowly. Adopting the MLP model allows such operations to minimize their tax exposure.

As a result of their stability and lower tax payments, MLPs generate consistent cash distributions, explains Morningstar. MLP returns range from 6 percent to 7 percent. These sentiments are echoed by The Growth Stock Wire, which reports that investors in MLPs earned a 16 percent return between 2002 and 2011.

Despite their attractive returns, MLPs have several downsides, explains Morningstar. The appreciation of individual units of investments is typically barely above the rate of inflation, and investors are responsible for tax obligations arising from their individual investments, making the process of filing returns incredibly complex.

Ownership of MLPs is divided into two categories; general partners and limited partners, notes Morningstar. General partners handle the daily operations of the business, while the involvement of limited partners is restricted to purchasing units of the partnership. Unlike limited partnerships, general partnerships are typically not publicly traded.

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