Securities Lawyers Blog
The investment attorneys of Gana Weinstein LLP are investigating investor claims of unsuitable investments in oil and gas related products. Our firm is currently representing a number of investors who lost substantial savings due to poor advice to concentrate holdings in speculative commodities investments like master limited partnerships (MLPs). Kayne Anderson MLP/Midstream Investment Company (NYSE: KYN) is a non-diversified, closed-end fund with an investment objective to obtain a high after-tax total return for its shareholders by investing at least 85% of our total assets in energy-related master limited partnerships and in other companies that operate assets used in the gathering, transporting, processing, storing, refining, distributing, mining or marketing of natural gas, natural gas liquids, crude oil, refined petroleum products or coal.
Year to date Kayne Anderson MLP/Midstream Investment Company has returned a -57.97% return as of April 30, 2020.
As a background, MLPs are publicly traded partnerships. About 86% of the total MLP securities market, a $490 billion sector, can be attributed to energy and natural resource companies. There are about 130 MLPs trading on major exchanges that focus on energy related industries and natural resources.
Wall Street loves MLPs because they provide high yields to investors and require companies to pay Wall Street in order to continue to grow. In 2013 banks earned fees of $890.3 million from MLP issuance. Bloomberg quoted an analyst stating that “MLPs are Wall Street’s dream,” because “[t]hey’re fee machines.” Naturally, in order to entice investors to continue to invest in MLPs Wall Street pumps up MLPs every chance they get. According to Bloomberg, in May 2014 “[a]nalysts predict that 93 of the 114 MLPs in existence will rise in value in the next year…” Astonishingly, “all but five MLPs are recommended by the majority of the analysts who cover them.” At that time professionals without conflicts called MLPs “the next great investment debacle” and warned that “many MLP shareholders…may not understand what they’ve gotten into.”