When Gregory Reid began his career as a wealth manager at Goldman Sachs over 20 years ago, he didn’t plan to become an expert on master limited partnerships (MLPs). But after investing in them over the years, he became convinced that their combination of high income, strong total returns and tax advantages was hard to beat.

So in 2007 he founded RDG Capital, a Houston-based asset and wealth management firm specializing in this once-dormant corner of the market. One major appeal of these publicly traded limited partnerships—which are typically involved in energy infrastructure businesses such as pipelines, storage and transportation—is their high distribution yields. At midyear, the yield of the Alerian MLP Index stood at 5.29%, well above the 3.75% yield for real estate investment trusts, the 3.7% yield for utilities and the 2% yield for the S&P 500 index.

Reid, whose firm was eventually acquired by Salient Partners, runs more than $4.5 billion in the strategy. About $1.2 billion of that comes from the Salient MLP & Energy Infrastructure Fund II, a two-year-old offering that invests mainly in energy MLPs, as well as energy infrastructure companies that serve as their general partners.

While the latter group’s yields tend to be lower than that of their affiliated MLPs, they typically experience stronger growth. That’s one reason the fund produced an annualized total return of 34% from its inception in September 2012 to the end of June 2014, while the Alerian MLP Index returned 23%.

Although high yields are a powerful draw for investors, Reid prefers to emphasize the “toll road” business models that make them a solid bet on the expansion of energy production in the U.S. Most of the fund’s holdings are in “midstream” companies that have storage and transportation assets, such as pipelines and storage facilities that link oil and gas producers with end user businesses and consumers. “They get paid to bring a product from point A to point B, and those payments are often in the form of long-term contracts linked to inflation,” says Reid. “We think it’s a more predictable business than upstream companies that do exploring or drilling, or downstream companies that sell the products to consumers.”

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