Management’s slice of the pie
Insider ownership is pretty important here at the Fool. Management’s stake in a company or partnership is often equated with their faith in the future success of the business, as well as a commitment to shareholders. When management holds a big stake in a company it’s as if they’re saying, “I’m in this with you.”
Aligning yourself with management is even more important with MLP investing, because limited partner units do not come with voting rights, giving unit holders very little say with what goes on. The thinking goes that if management has a high stake in a company, then they will do what it takes to protect not only their investments but also any investor who has come along for the ride.
With that in mind, let’s take a look at three families of investments, considering management’s share of the float in the general partner compared to the MLP.
First up, we have Kinder Morgan Inc (NYSE:KMI) and Kinder Morgan Energy Partners LP (NYSE:KMP):
Source: SEC filing
Followed by Energy Transfer Equity, L.P. (NYSE:ETE) and Energy Transfer Partners LP (NYSE:ETP)
Source: SEC filing
Finally, we have NuStar GP Holdings and NuStar Energy L.P. (NYSE:NS)
Source: SEC filing
It is pretty clear that management holds a much larger stake in the general partner than the underlying MLP. It should also be noted that Kinder Morgan Inc (NYSE:KMI) is structured as a C-corp, Energy Transfer Equity, L.P. (NYSE:ETE) is itself an MLP, and NuStar GP Holdings is an LLC. Structure is a non-issue as far as respective management’s holdings go (though that too can be a factor in an individual investor’s decision).
