OppenheimerFunds Inc. is poised to jump into master limited partnerships with its deal to buy SteelPath Capital Management, which has $2.6 billion under management and a seven-year track record in the MLP space.
Announced Tuesday, the acquisition will give the $176 billion OppenheimerFunds a solid foothold in the increasingly popular category, which is investing primarily in energy-related infrastructure projects.
Two years ago, SteelPath became the first company to wrap an MLP in a mutual fund. It was designed to give retail investors access to the attractive yields and some of the tax advantages of a vehicle exempt from state and federal taxes.
Flagship fund SteelPath MLP Alpha Ticker:(MLPAX) was launched in May 2010 and has grown to $670 million.
“The acquisition of SteelPath will enable OppenheimerFunds to respond to the growing needs of investors and advisers for investment products designed to offer income and inflation protection benefits,” OppenheimerFunds chief executive Bill Glavin said in a prepared statement.
From SteelPath’s perspective, the merger is largely about distribution, according to a statement from SteelPath founder and chief executive Gabriel Hammond.
“SteelPath will benefit from the broader and deeper exposure of the Oppenheimer distribution relationships, while our investment team will remain focused on energy infrastructure investment,” Mr. Hammond said.
Terms of the deal between the companies, both private, were not disclosed beyond that it is a “lock, stock and barrel acquisition,” said Art Steinmetz, chief investment officer at OppenheimerFunds.
Dallas-based SteelPath’s 21-member staff will be absorbed by OppenheimerFunds, Mr. Steinmetz said. They will represent about 1% of the acquirer’s total workforce.
Mr. Steinmetz said that OppenheimerFunds had considered launching its own mutual fund versions but concluded that “to build from scratch would have taken some time and several years to accumulate the track record to get on some platforms.”
The MLP model, he said, “fits well into our strategic plan to beef up our alternatives capability.”
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