Eagle Global's biggest holding is Banco Santander, the Spanish financial institution, which has a large exposure to banks in Latin America. Santander has been opportunistic in the economic crisis-taking advantage of distressed prices to buy banks that will be good investments in the next few years, Allen says.
The international equity strategy, which started in 1997, has an annualized return of 5.6% as of September 30. In 2008, the strategy matched the MSCI EAFA index, its benchmark, both down about 43%. This year, it is up 21% through the end of the third quarter, a few points below the benchmark.
Eagle Global's best performing strategy is the Master Limited Partnership (MLP), which has about $500 million under management and was up 56% through September 30. Master limited partnerships are publicly traded securities, just like stocks, but which get a K-1 tax form at the end of each year. MLPs are concentrated in the natural resource infrastructure industries. The Tax Reform Act of 1986 gave a tax advantage for companies that invest in energy infrastructure, Hunt says.
MLPs offer diversification and attractive long-term returns with relatively low volatility, Hunt says. "The attraction for high-net-worth individuals is particularly high for this sector because they have a high distribution," he says. "At the end of the third quarter, the distribution yield of our partnership was 8.1%, and that distribution grows over time. We think it will grow at a minimum 5% rate for the next couple of years. Also, that distribution is tax advantaged in that you don't avoid taxes on it, but you defer a large portion of your taxes on those distributions."