Examining the Active vs. Passive Debate for Midstream

09/30/20 | Michael Laitkep

Midstream investing has come a long way since the first MLP closed-end fund was introduced in 2004, and there are now a variety of ways to access the midstream space. While there have been many changes, one constant question is whether an active or passive strategy is better. Proponents of active investing claim outperformance of a benchmark can be achieved with skillful selection, while advocates of passive investing argue that excess returns cannot be maintained over the long run and prefer a hands-off approach with lower fees. This white paper examines the numerous factors relevant to this debate for midstream, including the characteristics of the products, applicable risk-return metrics, and the potential for closet indexing.

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