March continued to be a tough month for many pipeline master limited partnerships (MLPs). After the Alerian MLP Index fell below the S&P 500's February gain of 3.2% in February, March was not the month to catch up. MLPs have generally outperformed the broader markets; however, the niche subsector gave in to the negativity in February and continued into March, as the world watched the devastation of the tsunami swallowing Japan.

We believe MLPs are resilient, despite possible tax policy and threats of inflation, and that they have proven this as they reversed course mid-March to find somewhat stable ground in April.

The bounce back came as institutional investors increased activity in the second half of March. MLPs were down 6% mid-month and came back to finish relatively flat. Speculative investors headed to the sidelines, decreasing buying transactions while institutional investors accounted for the majority of the trading. There is a clear indication of an increase in interest from institutional investors.

Lipper data indicated throughout the week ending March 29 that its Sector Energy Funds reported net investor inflows of $683.5 million, building on the prior week's bullish number of $180.3 million. March 30 was, not surprisingly, the busiest session of the weekly period as investors squared away portfolios ahead of the last trading session of the quarter.

Heading into the week ending April 5, Lipper Data showed that its Sector Energy Funds reported net investor inflows of $517.7 million, marking a slight downtick from the previous week's inflows of $683.5 million; however, the four-week moving average for the dataset reports cash flowing in the sector at a rate of $152.6 million. This remains bullish for the energy space.

This year also looks bullish for the infrastructure space, as drilling activity picks up and the demand for infrastructure increases in tandem. On the investment side, the demand for MLPs is increasing as investors seek alternative investment options with competitive yields. With an average yield of over 6% for MLPs, this makes for an attractive opportunity. The MLP market has now seen four $500-million offerings within the past month or two, mostly driven by this investor demand.

The end of February saw the initial public offering (IPO) of the Nuveen Energy MLP Total Return Fund for $500 million, while the Cushing MLP Total Return Fund and Kayne Anderson MLP Investment Co. announced public offerings to make additional portfolio investments.

Also, Front Street Capital announced plans for an IPO for the Front Street MLP Income Fund II Ltd. Meanwhile, Morgan Stanley is following suit with its Morgan Stanley Cushing MLP High Income ETN, which will track a customized index of MLPs.

Additionally, Credit Suisse is set to launch the Cushing 30 MLP Exchange Traded Note (ETN), which will be linked to the Cushing 30 MLP Index.

Elsewhere, Kinder Morgan Inc.'s IPO in February was one of the largest among U.S. energy companies since Conoco Inc.'s offering, which raised $4.4 billion, more than a decade ago. However, in April, Energy Transfer Partners LP completed the largest MLP secondary offering at $718 million.

Also brewing positive sentiment are the numerous announcements of growth. Enterprise Products Partners LP revealed a number of expansion projects and new service agreements at the company's analyst day this month.

According to John Edwards at investment bank Morgan Keegan & Co., "EPD's core natural gas liquids (NGLs) business is hopping and it is looking to expand its NGL-export facility at the Houston Ship Channel and also to expand its Mid-America pipeline system. We believe that EPD has the best outlook of any MLP for the long term and should be in every MLP portfolio."

MarkWest Liberty Midstream & Resources LLC was one of the lone positive performers in March, and is holding strong in April, after announcing the development of Project Mariner West, a pipeline project that will deliver Marcellus shale ethane from MarkWest Liberty's Houston, Pennsylvania, processing and fractional complex to Sarnia, Ontario markets.

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