Energy Infrastructure
Strategy

The Energy Infrastructure Strategy uses a research-oriented and factor-based model to identify energy infrastructure companies that are likely to deliver sustainable long-term income and total return. We keep tax efficiency at the forefront, positioning the strategy to deliver superior realized return compared to other mutual funds and SMA strategies.

Wind Energy Investing

With a primary focus on midstream Master Limited Partnerships (MLPs), midstream energy and renewable energy companies, we seek to invest in companies that have:

High-quality, well-integrated and defensible business models

Sustainable and growing cash flows

Attractive and growing dividends

Strong balance sheets

Attractive relative valuations

High-integrity management

RESEARCH-DRIVEN PROCESS

— Accounts for macro energy and economic outlook

— Fundamental research and detailed modeling

— Combines analytics with extensive due diligence

— Systematic, intuitive, and repeatable investment process

— Uniquely cognizant of tax efficiency to improve realized return

— ROIC-focused to identify companies with long-term sustainable income

— Valuation disciplined

— Allocation based on total return outlook tempered by risk mitigation and exposure limits

— Director, Darrell Horn, founder of Center Coast Capital Advisors

— Managing Partner, John Edwards, a top 10 Institutional Investor ranked analyst in midstream energy with decades long experience in broader energy (midstream, utilities, independent power, renewables)

— Co-Portfolio Manager, Dylan Nassano, with an extensive research background in energy infrastructure

— CEO, James West, former CIO of a multi-family office, tax-managing energy infrastructure portfolios

Tax Efficiency at the ForeFront

Fund vehicles and other separately managed account strategies in our sector are notoriously tax inefficient. Fund vehicles create additional tax drag and more active trading strategies can generate negative tax impacts by ignoring suspended losses within companies.

Principal Street’s Energy Infrastructure Strategy introduces the often-missing element of tax cognizance. With a true long-term investment focus, not a trading focus, the strategy is biased toward high-quality names with long-term time horizons. When we do rebalance, we evaluate expected tax effects against expected improvement.

MARKET AND ASSET CLASS APPEAL

Essential to the functioning of the U.S. economy, energy infrastructure offers significant cash returns to investors. Among energy infrastructure companies, expenditures are falling, free cash flow is rising, and corporate structures have been simplified, resulting in a more investable sector. Despite the fundamental and structural improvements in the sector, valuations have not caught up, providing an enticing entry point for investors.

THE US ENERGY INFORMATION ADMINISTRATION FORECASTS AGGREGATE GLOBAL ENERGY DEMAND GROWTH OF 43% BETWEEN 2018 AND 2050.

Portfolio Management Team
JOHN D. EDWARDS, CFA

JOHN D. EDWARDS, CFA

MANAGING PARTNER

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Portfolio Management Team
DYLAN T. NASSANO

DYLAN T. NASSANO

CO-PORTFOLIO MANAGER

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