Merrill Lynch Pierce Fenner & Smith Inc. slashed its oil and gas pipeline holdings in the fourth quarter of 2017 while other global asset management firms made significant midstream investments, an S&P Global Market Intelligence analysis of SEC filings shows.
Merrill Lynch sold off millions of units of Energy Transfer Partners LP and Enterprise Products Partners LP stock, dumping 64% of its ETP holdings and more than 67% of its Enterprise stake, according to investment data from Form 13F filings. The firm's total stake in midstream companies covered by S&P Global Market Intelligence slid from $3.44 billion in the third quarter of 2017 to $1.81 billion in the fourth quarter.
Morgan Stanley Investment Management Inc., UBS Asset Management AG and Goldman Sachs Group Inc., on the other hand, all grew their interests in multiple partnerships in the midstream energy space. UBS and Goldman Sachs raised their stakes in ETP by a combined nearly 22 million units, while UBS, T. Rowe Price Group Inc. and Bank of America Corp. together bought an additional 24 million Enterprise shares during the period.
Master limited partnerships, entities that hold pipeline assets with certain tax advantages, that have been released from funneling required cash contributions to their general partners, such as Enterprise and Williams Partners LP, were particularly popular, with Goldman Sachs and Morgan Stanley upping their stakes in Williams Partners by 253% and nearly 88%, respectively.

Institutional investors have lately favored midstream MLPs that are no longer burdened by incentive distribution rights, which can threaten long-term stability by raising capital costs and eating away at cash flows. ETP retains a significant incentive distribution right burden under its agreement with Energy Transfer Equity LP, but the family of companies is in no rush to eliminate the payouts before 2019, according to Energy Transfer Chief Kelcy Warren.
Nine of the top 10 institutions most heavily involved in MLPs boosted their cumulative investment positions in the quarter. UBS saw the biggest increase, at 23%, or a nearly $1 billion hike in the market value of its assets. ALPS Advisors Inc. grew its holdings in the sector by nearly 13%.
Institutional investors as a whole, however, were attracted to midstream C corporations over MLPs during the fourth quarter, with Enbridge Inc., ONEOK Inc. and Williams Cos. Inc. seeing net increases in institutional ownership.

