Transamerica MLP & Energy Income

Transcription

1 Alternative Investments Transamerica MLP & Energy Income A comprehensive approach to infrastructure investing Portfolio managed by Kayne Anderson Capital Advisors, L.P. Transamerica Funds are advised by Transamerica Asset Management, Inc. and distributed by Transamerica Capital, Inc. Not insured by FDIC or any federal government agency. May lose value. Not a deposit of or guaranteed by any bank, bank affiliate, or credit union.

2 Expand into energy by investing in energy infrastructure North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world. International Energy Agency (IEA) The IEA predicts that North America will become a net exporter of natural gas by 2018, and be completely energy self-sufficient by Thanks to new advancements in shale drilling, such as hydraulic fracturing (or fracking), significant reserves of oil and natural gas are being unlocked throughout the United States and fueling North America s energy revolution. 2 transamericainvestments.com

3 Transamerica MLP & Energy Income Shale drilling is a multi-decade opportunity that may provide access to untapped energy investments BAKKEN SHALE (25 years) Monterey Pinedale Uinta Piceance Powder River Niobrara Mississippi Lime Antrim Utica MARCELLUS SHALE (100 years) Avalon & Bone Springs Granite Wash Cline Wolfcamp Woodford Fayetteville Tuscaloosa Marine HAYNESVILLE SHALE (50 years) EAGLE FORD SHALE (50 years) BARNETT SHALE (30 years) Number of years of drilling inventory currently in place as estimated by Enterprise Products Partners L.P. Source: Kayne Anderson Capital Advisors, L.P. WELLHEAD SHALE FRACTURES With advances in hydraulic fracturing, we are unlocking significant supplies of oil and gas reserves throughout the United States. What is fracking? The fracking process involves injecting fracturing fluid (a combination of water, chemicals, and proppant) at high speed into a wellbore and through the underlying hydrocarbon rock below. This cracks the rock with enough pressure to create spin-off fractures that permeate through the formation and allow trapped pockets of oil and gas to escape back up the wellbore. Once the injection process is stopped or the pressure is reduced to allow the oil and gas to surface, the proppant (generally any particulate material such as grains of sand or ceramic) prevents the fractures from closing. 3

4 Infrastructure is vital to energy expansion What is infrastructure? By definition, infrastructure is the basic facilities, services, and installations needed for a specific function. In the energy space, new infrastructure will be required to transport, store, and distribute the resources harnessed from North America s newly accessible oil and gas reserves. Within the energy value chain, companies operations and investments are primarily classified as upstream, midstream, or downstream. Energy infrastructure generally refers to midstream. Tankers Refineries UPSTREAM Exploration and production Railroads Consumer fuel Drilling and wells Crude oil MIDSTREAM Pipelines, processing, and transportation Utility companies Off-shore rigs Storage Oil trucks DOWNSTREAM Refining products and marketing 4 transamericainvestments.com

5 Transamerica MLP & Energy Income Transamerica MLP & Energy Income offers a comprehensive approach to energy infrastructure investing Transamerica MLP & Energy Income focuses on three investment instruments in energy infrastructure MLPs & MLP equivalents, energy infrastructure equities, and debt of energy-related companies and seeks to provide: Long-term growth of capital A wide range of current income opportunities A 25% maximum allocation to registered MLPs (to avoid the fund being taxed twice as a C corporation instead of once as a regulated investment company [RIC])* Room to move across various investment vehicles within the energy space through a flexible mandate * A 25% maximum MLP allocation may create tax advantages over pure MLP funds, but will limit an investor s ability to experience the potential advantages of investing in a greater percentage of MLPs. The 25% maximum allocation to MLPs in Transamerica MLP & Energy Income does not include fund allocations to MLPs that have elected to be taxed as a C corporation for U.S. federal income tax purposes. A single investment that combines MLPs, energy infrastructure equities, and energy-related debt offers access to a broad array of investment opportunities in the North American energy revolution and the potential benefits available from each. What is an MLP? Master limited partnerships (MLPs) are publicly traded limited partnerships that consist of a general partner and limited partners. MLPs distribute income to investors similar to dividend-paying stocks, but their ownership structure (partnership versus corporation) may allow them certain tax advantages. 5

6 Investment opportunities are comprehensive Investors can be a part of the energy revolution through Transamerica MLP & Energy Income. The fund invests across multiple energy infrastructure categories and combines the potential benefits of each into a single comprehensive investment strategy. These investments > MLPs and MLP equivalents Energy infrastructure equities Debt of energyrelated companies May provide opportunity for: Competitive distributions and tax advantages Enhanced returns and diversification Lower volatility Income potential Growth potential Real asset diversification Distributions in excess of the fund s earnings and profits will, as to each shareholder, be treated as a return of capital to the extent of the shareholder s basis in his or her fund shares, and as capital gain thereafter (assuming the shareholder holds the shares as capital assets). A distribution treated as a return of capital will not be taxable currently but will reduce the shareholder s tax basis in his or her shares, which will generally increase the gain (or decrease the loss) that will be recognized on a subsequent sale or exchange of the shares. MLPs and MLP equivalents MLPs are often more liquid than traditional partnerships because they trade on major exchanges like shares of a public corporation. MLPs distribute income to investors similar to dividend-paying stocks but are not taxed at the corporate level, allowing the potential for greater distributions and competitive yield compared to other asset classes. MLPs 5.9 MLPs have the potential for competitve distributions. Baa Bonds REITs Utilities U.S. 10-Year Tresuries Yield* (%) Source: Alerian and Factset. Data as of 12/31/13. MLPs are represented by the total return of the Alerian MLP Index, a composite index of the 50 most prominent energy MLPs; Baa Bonds represent the performance of the Baarated segment of the U.S. corporate bond market; real estate investment trusts (REITs) are represented by the FTSE NAREIT Equity REIT Index, designed to track the performance of publicly traded REITs; utilities are represented by the Dow Jones Utilities Index, designed to track the performance of the Utilities sector; and U.S. 10-Year Treasuries represent the performance of the U.S. Government 10-Year Treasury Bond. MLP and REIT yield/ distributions may include the return of capital. The Alerian MLP Index does not represent the Transamerica MLP & Energy Income fund. The indices shown are for informational purposes only and do not reflect the performance of any investment. You cannot invest directly in an index. Past performance does not guarantee future results. 6 transamericainvestments.com

7 Transamerica MLP & Energy Income Energy infrastructure equities Energy equities have historically posted strong returns compared to other equity asset classes. With the necessary build out of energy infrastructure, energy equities have the potential for strong returns relative to other equity sectors. This has also been the case historically over the past 10 years, energy equities have posted strong returns. Annualized Return (%) Communications Energy 3.43 Financials Health Industrials 7.84 Real Estate 8.05 Technology 9.64 Utilities Source: Morningstar Direct. Data as of 12/31/13 for the 10 years ending 12/31/13. Categories shown are represented by their respective US OE Morningstar categories. Past performance does not guarantee future results. You cannot invest directly in a Morningstar category. Debt of energy-related companies Energy-related companies have the ability to issue debt in order to raise capital to support the costs of building out infrastructure. Most of these contracts tend to show a relatively stable cash flow profile with a longer duration, making them a viable option for current income. Adding debt to an energy-related fund can help reduce overall portfolio volatility. Top 10 worst months for S&P 500 over the last 5 years Energy debt can provide the opportunity for a volatility buffer during periods of equity stress. Monthly Return (%) Jan 09 Feb Jan May Jun 10 Aug Aug Sep 11 Jan 09 Dec 13 Energy Debt S&P May 12 Return 17.94% 9.21% Aug 13 Standard Deviation Source: Morningstar Direct. Data as of 12/31/13 for the five years ending 12/31/13. Energy Debt is represented by the Barclays Investment Grade Energy Total Return Index. Past performance does not guarantee future results. You cannot invest directly in an index. Standard deviation is a statistical measurement that helps to gauge historical volatility and higher standard deviation indicates greater relative risk. 7

8 Professional management is essential for success With so many energy investments available today, choosing professional management through a mutual fund may be a prudent approach to entering the energy space for some investors. At Transamerica, our goal is to connect you with the experts. Kayne Anderson Capital Advisors, L.P. brings more than 30 years of industry experience to portfolio management and boasts the longest tenure of any MLP money manager. Key differentiating factors include: Established energy manager with more than $24 billion in assets under management (as of 12/31/13) Leading provider of private capital in the midstream energy space Strong relationships and an extensive network within the energy sector Vertical integration of private equity and asset management teams Kayne Anderson Capital Advisors, L.P., founded in 1984, is a leading independent alternative investment management firm focused on niche investing in upstream oil and gas companies, energy infrastructure, specialized real estate, middle market credit, growth private equity, and distressed municipal opportunities. 8 transamericainvestments.com

9 Transamerica MLP & Energy Income Adding Transamerica MLP & Energy Income to your portfolio You could incorporate Transamerica MLP & Energy Income into your portfolio by: 1 Including the fund as part of your alternatives allocation Provides diversification benefits and access to real assets 2 Reallocating part of your traditional equity allocation Provides growth opportunities and diversification 3 Replacing a portion of your fixed income holdings Provides income options through MLPs and energy debt The fund may be appropriate for investors looking for: Total return opportunities Access to infrastructure assets with daily liquidity and no K-1 filings Exposure to energy assets without taking on the additional risk associated with traditional commodities Exposure to MLPs without the tax implications of investing directly in MLPs Active institutional management by one of the industry leaders within the energy sector A varied approach to investing in the North American energy revolution 9

10 Transamerica MLP & Energy Income To learn more about Transamerica investment strategies, contact your financial advisor or visit transamericainvestments.com Mutual funds are subject to market risk, including the loss of principal. Investments in MLPs involve risks that differ from investments in corporate issuers, including risks related to limited control, cash flow risks, dilution risks, and risks related to the general partner s right to require unit holders to sell their common units at an undesirable time or price. The energy industries can be significantly affected by fluctuations in energy prices and supply and demand of energy fuels, energy conservation, the success of exploration projects, and tax and other government regulations. Sector funds can be more volatile because of their narrow concentration in a specific industry. Stock markets are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, economic, or other developments. The fund is subject to certain MLP tax risks. Risks associated with accounting for deferred tax liability could materially impact the net asset value. An investment in the fund does not offer the same tax benefits of a direct investment in an MLP. The fund is classified as non-diversified, which means it may invest a larger percentage of its assets in a smaller number of issuers than a diversified fund. To the extent the fund invests its assets in fewer issuers, the fund will be more susceptible to negative events affecting those issuers. Shares of the fund may only be sold by offering the fund s prospectus. You should consider the investment objective, risks, charges, and expenses of the fund carefully before investing. The prospectus contains this and additional important information regarding the fund. To obtain the prospectus and/or a summary prospectus, please contact your financial professional or go to transamericainvestments.com. The prospectus should be read carefully before investing. Transamerica Funds are advised by Transamerica Asset Management, Inc. and distributed by Transamerica Capital, Inc. Not insured by FDIC or any federal government agency. May lose value. Not a deposit of or guaranteed by any bank, bank affiliate, or credit union. 10 transamericainvestments.com

11 Transamerica Alternative MLP Investments & Energy Income

12 Transamerica MLP & Energy Income About Transamerica At Transamerica, we make products that help meet the needs of today s and tomorrow s investors. Many know us as a leading provider of insurance and retirement products, but we are also recognized for offering an array of timely investment products, including a broad lineup of diverse mutual funds. But the way we see it, we don t just make products. We make solutions. Solutions that allow you either to design your own portfolio using one of our single asset class mutual funds, or to use one of our multi-manager solutions for a core portfolio. To learn more about Transamerica investment strategies, contact your financial advisor or visit transamericainvestments.com. MBRMLP0314 transamericainvestments.com