An investment that the financial industry has been pushing recently as a hot product is Master Limited Partnerships, or MLPs. In a low interest rate environment, many financial professionals sell Master Limited Partnerships to their customers. Many MLPs have been wrongly sold as a supposedly safe way to earn higher interest rates with little or no risk.
What exactly is an MLP? An MLP is a limited partnership that is publicly traded on an exchange. To be legally classified as an MLP, the partnership must derive most of its cash flow from real estate, natural resources, and commodities. Over the last decade, MLPs have become one of the fastest growing asset classes. With yields approaching 10% or higher, it’s little wonder why investors have taken the bait and bought up MLPs at a record pace.
This is particularly so for retirees who may need income but who might be earning only a little over 1 percentage on a one-year CD at a local bank. While financial professionals loaded up their customers on MLPs, they’ve often overlooked or flat out misrepresented the significant risks associated with these investments.
Contrary to many sales pitches, MLPs are not bonds or bond substitutes. In fact, MLPs are incredibly sensitive to oil and commodity prices. When oil and commodity prices plunge, MLP prices can drop, yield payments might be suspended, and some MLPs might even become illiquid meaning that you can’t sell or get out of the investment.
If you suffered losses in MLPs that you believe may have been sold to you inappropriately, give us a call. We might be able to help you recover your losses.
We often hear stories about Ponzi schemes that target a particular group or community, such as a church congregation. When a con artist chooses to target a specific group in this manner, it’s called “affinity fraud.” There have been dozens of cases of affinity fraud related to Ponzi schemes just over the last year, which have affected investors all over the nation. Unfortunately, con artists are generally willing to manipulate any advantage they can find that might get you to hand over your cash—and sometimes that means taking your cash and moving on to milk your loved ones.