Whenever you and millions of other Americans drive a car, turn on a light or cook a meal, you’re using energy that’s delivered through a huge national infrastructure.

What if you could generate income by investing in that infrastructure and diversify your portfolio with an alternative to stocks and bonds at the same time?

Energy infrastructure Master Limited Partnerships, or MLPs, can help you achieve this goal.

MLPs are the publicly traded partnerships that make up a large part of the nation’s energy infrastructure. Energy infrastructure MLPs transport, store and process hydrocarbons such as oil, natural gas, natural gas liquids and refined products. These midstream MLPs can be likened to a national highway where cars pay a “toll” to travel from state to state. Similarly, energy infrastructure MLPs are designed to help earn steady income in the form of “tolls” paid to transport hydrocarbons between the upstream source and the end user.

Even though the price of oil and natural gas will fluctuate, the income generated from these “toll road” businesses is not generally affected by such swings in price because tolls are based on the volume of oil or natural gas that MLPs move.

Because energy infrastructure is so vital to the economy, MLPs currently receive preferred tax treatment under the U.S. tax code.

What’s more, as America increases oil and natural gas production, there’s likely to be more and more “traffic” to collect tolls on. For midstream MLPs, that may mean more revenue that may be used to pay investors in the form of taxable distributions and tax-deferred return of capital.

Typically, MLPs make quarterly distributions to the limited partners, creating a potentially attractive steady income stream.

And there is more to the story. Not only do MLPs realize favorable tax treatment, many benefit from periodic toll increases that are included in their contracts that help keep pace with inflation – potentially providing an inflation hedge as well.

But MLPs have been a headache to own because of complex tax reporting.

Since the creation of the first open-end MLP mutual fund in 2010, investing in MLPs has become simpler, and more investors have been able to gain exposure to this alternative asset class. These MLP open-end mutual funds handle the tax reporting and the investor receives a form 1099.

If you’re looking to diversify your portfolio with an alternative to equities and fixed income that has historically provided an income stream and kept pace with inflation, an MLP open-end mutual fund may be appropriate for you.

Call your OppenheimerFunds advisor consultant today to find out more about how MLP open-end mutual funds may fit into a portfolio.