Mastering Energy Market Trends for Portfolio Growth
Recorded on location at the Exchange ETF Conference, Zephyr market strategist Ryan Nauman speaks with Mark Marifian, Head of Product at Tortoise Capital, about why energy belongs in portfolios and common misconceptions that it’s only about crude prices or big integrated oil companies. Marifian explains the breadth of energy sub-sectors, highlights midstream’s fee-based, repeatable cash flows, and discusses how energy infrastructure can provide income and inflation protection through contract and tariff adjustments linked to PPI. They cover how allocators may bucket energy within income, real assets, or core/satellite equity exposures, and why energy’s small S&P 500 weight may create opportunity. Marifian also outlines MLPs’ role, introduces Tortoise’s TMLP ETF, and discusses data-center/AI-driven demand, energy security, and an oil “sweet spot” range of $60–$90.
Learn more about Zephyr here.
Learn more about Tortoise Capital here.
00:00 Welcome and Disclosures
00:41 Energy in the Spotlight
01:28 Meet Mark Marifian
02:50 Why Energy Belongs in Portfolios
05:13 Misconceptions and Energy Subsectors
07:11 Energy’s Small S&P Weight
08:23 Where Energy Fits in Allocation
10:21 MLPs Explained and Income Potential
11:26 How to Access MLPs with TMLP
12:50 Future Demand from AI and Security
15:12 Oil at $100 and the Forward Curve
17:17 The Sweet Spot for Oil Prices
18:32 Wrap Up and Where to Learn More
Transcript
Welcome to the Adjusted for Risk podcast.
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:Join myself, Brian Naumann, as I
talk markets, investments, economics,
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:and life as I help prepare you
for the upcoming week in markets.
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:I work for Zephyr, and all opinions
expressed by myself and my podcast
5
:guests are solely of their own opinions
and do not reflect the opinion of
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:Zephyr or Informa, its parent company.
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:This podcast is for information
purposes only and should not be
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:relied on for investment decisions
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:Welcome everyone to Zephyr's
Adjusted for Risk podcast.
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:We are recording on location at the
Exchange ETF Conference, which has
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:been a fantastic conference so far.
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:This is Ryan Nauman, the market
strategist here at Zephyr.
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:Energy has been a very hot
topic well before oil increased
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:to over $100 a barrel.
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:The energy demands from data centers
have put energy in the headlines.
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:Now we have oil that's above $100.
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:Well, I have on the perfect guest
to discuss all things energy
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:and what it means for investors.
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:But first, this episode is sponsored
by the award-winning Zephyr, which
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:helps investment professionals
make more informed investment
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:decisions on behalf of their clients.
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:I'm very honored and
excited for our next guest.
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:I'd like to welcome Mark Marifian.
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:Mark is the head of product
at Tortoise Capital.
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:Mark, thank you so much
for coming on the podcast.
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:It's an honor to have you on.
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:Can you tell me a little bit about
yourself and Tortoise Capital?
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:I'd be happy to.
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:So, uh, yeah, no, uh, been in the, um,
investment industry really all my career.
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:Um, started at, uh, Mercer, um,
doing big consulting, and then, uh,
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:moved to, uh, Advisory Research,
which is a MLP manager, um, in St.
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:Louis, and then Tortoise
sequently, um, acquired us in:
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:So that was in 2014 when I
joined Advisory Research.
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:Um, you know, really been
in product, um, since then.
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:Started off as a product specialist,
um, moved to, you know, client portfolio
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:manager doing some client facing, um, for,
for a number of years, and that's just
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:wonderful if I could say, because that's
really where you find out, you know, the
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:pulse of what, what matters to clients
and, uh, you know, what, what's- Mm
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:what's meaningful to them.
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:Um, and then to have transitioned into
the, uh, the head of product role over
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:the last couple years and, uh, you
know, we've, we've kind of retooled
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:our, our, uh, platform and so, um, you
know, I think we're well positioned
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:for kind of where the market's heading.
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:Yeah, that's fair.
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:Market's heading, we could probably spend
all, all, all episode talking about where
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:the market's heading, but let's just
take a step back and I think people, you
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:know, financial advisors, when they're
building investment portfolios, obviously
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:you have your core asset classes, fixed
income to People think about energy.
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:They think maybe, "Well,
maybe we should include oil.
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:It could be maybe a good diversifier."
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:But why invest in energy?
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:Why put it in an investment portfolio?
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:Yeah.
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:I, I think this question, um, you know,
a lot of people ask this question, why?
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:And I, I think part of it is you don't see
what's happening within energy every day.
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:You don't, you don't, you
don't see the drilling.
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:You don't see the pipelines
that are moving the energy.
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:You don't see the refiners that are, are
cutting and, uh, you know, cracking, um,
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:you know, the, the barrels, if you will.
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:Mm-hmm.
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:And so, you know, a lot of
this is just invisible to us.
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:And, you know, we just expect when our…
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:You know, we wanna turn the thermostat
on, that, uh, you know, we're gonna
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:be able to cool our house, or we're
gonna be able to, to heat our house.
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:Or, you know, we wanna go cook some,
uh, some steak, you know, we're
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:gonna be able to fire up the grill,
or we're gonna be able to, uh, you
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:know, turn the stove on and have…
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:Yeah.
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:So anyways, I, I think, like, some
of this just you don't naturally
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:think about it day in and day
out, where, you know, with…
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:Think about technology.
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:Like, everyone's on
their phone all the time.
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:Like, it makes sense why it, it would fit
potentially in your investment portfolio.
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:But, uh, you know, energy has a
s- You know, right now it's not
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:a huge, uh, part of the S&P 500.
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:I think that's where the opportunity is,
quite frankly, because it's so small.
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:Uh, but yeah, really the definition of
energy, I would say, is also changing.
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:Um, you know, it- i- in the past
you would, you would traditionally
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:just look at Exxon, Chevron
as y- as your big integrateds.
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:And, uh, you know, it's
much more than that now.
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:To me, the utility industry, you know,
is really part of the, the energy story,
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:and we, you know, we think about that
through, um, the electrification lens.
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:Yeah.
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:That's fantastic, Mark.
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:And you're exactly r- I think
we take it for granted, energy.
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:Even though we use electricity in
everything we do, we use energy,
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:whe- Oil is in everything we touch.
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:Everything.
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:So maybe we just take it for granted.
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:We- So that's a great exam- And
you used steak as an example.
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:So, um, you won me over there.
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:Grilling a steak is perfect.
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:Is perfect.
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:That's right.
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:You need the propane, right?
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:Yeah.
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:The propane's gotta come
from somewhere, right?
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:So.
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:Exactly.
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:That's right.
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:Exactly.
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:What, um- And you kind of touched on it.
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:What are some misconceptions,
though, of investing in energy?
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:Is it like, well, it's just all
oil or like you said, ExxonMobil?
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:You know, what, what's the misconceptions?
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:There's, there's, there's a lot of depth,
um, and, and sub-sectors, you know,
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:then different ways you can play energy.
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:Of, of course, the headlines
will always be what's going
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:on with the price of crude.
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:Um, but, you know, these are, these
are businesses that have been…
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:You know, the infrastructure's been
built over, you know, 100 years
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:now in terms of the, the drilling.
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:And the first pipelines were built,
um, you know, in, in the:
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:So, you know, this is infrastructure
that has grown over time, um, you
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:know, a- a- and, and just evolved.
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:And, and so just 'cause you see the
commodity price moving up or down,
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:that doesn't mean the cash flows are
moving dollar for dollar with, with
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:how the commodity prices are doing.
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:These are actually underlying businesses.
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:You know, people work at them, uh,
full time and, and they wanna h- build
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:a stable cash flow moat, um, a- and,
and have a repeatable business model.
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:And so that's what you see in a lot of
these different sub-sector industries.
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:Um, you know, our, our expertise
historically has been midstream.
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:And, and that, that is…
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:You know, think about a pen.
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:You're just moving a pipe li- You,
you're moving the volume from point
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:A to point B, and the midstream
guys just get paid a fixed fee.
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:And so that is the repeatable
business that, that they've done.
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:You know, we have thousands
and thousands of miles, um, of
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:pipeline across the country.
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:So, you know…
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:But we have refiners.
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:You have oil field services.
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:You have the drillers upstream.
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:You have the integrateds that do it all.
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:You have LNG, um, you know, exporters.
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:So, I mean, there's, there's all these
different ways you can get investments,
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:um, and exposure to, to energy.
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:Yeah, I'm glad you brought that up.
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:It is…
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:There's so much more to that sector.
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:I think it's a lot, it's a lot bigger than
what I think people really think about.
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:But like you said, it's such a small
part of the S&P, so there's some alpha
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:opportunities there, I would think.
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:Yeah.
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:I mean, if you go back in history, and,
and this is, you know- Yes, there's
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:been some, some crises that's l- have
led to some of this, these weightings.
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:But energy's, you know, has been
as high as 30% of the S&P 500.
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:I think people would just like
jaws would drop if they heard.
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:Yeah.
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:And that probably wouldn't
be a good scenario, right?
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:Like that- … that means the other
sectors are potentially cratering-
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:Yeah … and, and energy's expanding.
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:But y- you know, even go back to
the, to late, uh,:
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:2008 when, when oil went to 147,
and energy was in double digits,
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:um, in terms of a sector, uh, you
know, allocation within the S&P 500.
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:So, you know, we are
really kind of in this…
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:If you think about it long term,
we're in this very odd period where
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:energy's kinda hovered between 2 and 4%.
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:Mm-hmm.
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:Um, the, the depth was at COVID,
um, when, when of course prices went
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:negative and, you know, we thought
we had 10 years of, of life- … left
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:for this, this industry that had been
around 150 years, and everything was
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:gonna be moved to renewables overnight.
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:You know, that, that's, that pendulum
has certainly shifted, um, a fair amount.
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:And, you know, the, yes, the, the n- the
overall allocation's a bit bigger than
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:it was then, but, you know, historically
speaking, you're still at just pretty
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:low levels in terms of, um, h- how
it is represented in the portfolio.
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:I think the, and you may be going here,
but I think the bigger question that,
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:uh, that allocators a- ask themselves
is, how do I fit this in my portfolio?
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:Yeah.
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:Well, why don't you answer it?
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:That is exactly it.
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:Uh, it will segue to that.
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:Like, where, where does it…
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:Is it a alternative?
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:Do you just bucket in with, um-
You know, equities, but though then
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:there's different ways of getting
exposure to energy, which might be
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:more of a income-oriented product.
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:That- that's right.
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:I'd, I'd say that's probably more typical
when people think about energy, is
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:that they're thinking about the income.
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:They're thinking about it in, um…
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:So, so we'll see a lot of the folks that
we speak to that are model allocators,
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:they say, "All right, let me carve
something out of my income model for
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:energy, um, for energy infrastructure."
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:I mean, you're, you're seeing yields.
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:Yes, yields have come down, but you're
still seeing yields at, you know, 5-plus
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:percent, uh, for a lot of those companies.
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:Mm-hmm.
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:Energy yields are, are gonna be above
the, the broader market as well.
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:So it is a good place you
can get, you can get income.
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:Um, you also get, you know, if
you're just focusing on broad energy
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:specifically, I mean, a lot of people
worry about inflation protection, right?
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:Specifically, their contracts adjust,
and so relative to the PPI, which is
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:the Producer Price Index, and so if the
Producer Price Index goes up, that means
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:they can increase the, the fee year
over year on what the tariffs that they
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:charge on, uh, for interstate pipelines.
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:So there's this pass-through effect,
which not all industries have, but
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:certainly the energy industry has, hence
your, your inflation protection- Mm-hmm
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:um, you know, ability there.
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:So y- you know, I…
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:Look, I, I think you could
put it in real assets.
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:You can certainly put it in income.
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:And then if you think about the broad
equity allocation, you know, I'd, I'd
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:say people maybe stick it more in that
core satellite position when they're,
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:when they're, when they're bullish there.
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:So one of the ways…
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:That's fantastic, Mark, and it, it, you
know, I love the fact that you brought up,
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:too, you know, inflationary hedge, right?
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:Obviously, everybody was looking
for a hedge to inflation.
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:So the next question then is a lot
of people, they can access energy.
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:You know, there's ETFs
obviously, but there's also MLPs.
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:Mm-hmm.
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:MLPs are a top, a popular way of
accessing, getting exposure to, to energy.
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:Why?
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:W- what is it about MLPs
and, and then the how?
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:Yeah, I mean, I, I covered it a little bit
earlier, but ener- MLPs sit specifically
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:within the energy infrastructure sector.
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:Mm-hmm.
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:And so they are, they have long-term fixed
fee contracts, and those long-term fixed
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:fee contracts allow them to have stability
of their underlying business model.
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:And because they have a more stable
business model that is less impacted
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:by the, the up and the downswings
of, um, commodity prices, what they
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:can do is pay a bigger distribution
that is repeatable and consistent.
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:So I think that is where, you
know, folks really like portfolios.
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:They'll be, they'll be yielding, you
know, anywhere from 5 to 8, 9, 10%.
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:Um- Okay.
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:Mm-hmm.
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:So yeah, that's a really
income play there.
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:More income oriented.
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:Okay.
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:Yep.
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:Yep.
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:So then financial advisors out
there, they hear that, great
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:income, perfect for this time.
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:But then how, like, MLP, like how, where
would they go to get more information,
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:or how would they implement it?
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:Um, are they…
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:Do they have ticker?
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:You know, like- Yeah.
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:Yeah.
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:We…
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:So that, that is our, our core is,
is midstream energy infrastructure.
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:That's how our business starts.
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:We got a multitude of ways
you could play, um, MLPs.
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:Specifically, um, we, we have pipeline
funds that, uh, you know, have C
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:corps and MLPs, but then we have a
dedicated, um, uh, MLP, uh, ETF as
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:well, which we, which we just launched,
uh, TMLP, which is a Tortoise MLP ETF.
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:And so that, that tracks our underlying
index, which we built, um, you know,
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:15 years ago, um, and wh- which really
owns the best and market-weighted,
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:uh, MLPs in, in the universe.
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:And so that, that's one…
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:That, that's an index
we've had for a long time.
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:Um, it, you know, gives you a
nice broad set of ex- exposure.
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:So if you look at some of the other
competing, uh, products are gonna
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:be more narrow, 13, 14 holdings.
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:Top, top holdings are gonna,
you know, be 10, 12, 13, 14%.
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:Um, we are gonna be more
market cap weighted.
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:We have 23 holdings, um, so a little
bit more diversification there.
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:Fantastic.
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:Great information, Mark.
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:So let's take a step back again.
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:So what's the future look like for energy?
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:I mean, I talked about the data centers,
electricity, big demand there for energy.
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:You have oil.
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:Who knows where oil's gonna be next
time we talk and if we talk in a
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:year- Yeah … where oil's gonna be.
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:But what's the future look like?
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:Yeah, I mean, I, I think what
you're getting is these signals
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:and, and a realization that, um,
you know, front and center energy
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:is, is really in high demand.
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:Now you're seeing it on, on the
AI side specifically because these
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:data centers are just so intensive.
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:So, I mean, the easy, you know, way
I relate to people is you think about
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:a Google search, and then you think
about a ChatGPT search, just a simple
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:ChatGPT, not even the picture one.
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:10 times the amount- … of energy usage.
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:And, and, and then you think
about the broader population.
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:How many people are doing
more ChatGPT searches?
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:I can tell you my, my ChatGPT
usage is, I was a early adopter,
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:and it continues to skyrocket.
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:Yeah.
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:So, um, you know, uh, the future of
energy I think is really bright, but
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:we're coming to a realization that,
uh, you know, it's gonna be needed.
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:So if, if you back up and think
about how Tortoise has talked about,
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:uh, energy, it's reliability, it's
affordability, and it's security.
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:And, um, you know, that, that I
would, I would say security, like
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:all of a sudden, you know, we're
talking about security as a concern.
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:No one was thinking about energy
security as a concern five years ago.
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:It just kinda happened for us.
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:But when you get in these, these types
of, uh, you know, regional wars where
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:you're cutting off and choking off, you
know, 20 to 30% of, of any type of, um,
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:you know, commodity, all of a sudden
you're worried about security and you-
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:you're worried about affordability, right?
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:Like, what's the price?
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:What am I gonna pay at the pump?
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:Um, s- and then- And these are all
things that, that we're thinking
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:about, you know, day in and day out.
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:But the pendulum has just swung
back to, I think, more of a
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:normalization- Yeah … stage.
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:Yeah, and I feel, I've always talked a
lot lately, we're in a normalization.
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:It just said markets, I would
feel maybe not with the war
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:and, and, and oil, but- Correct.
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:Yeah … you know, interest rates
aren't supposed to be at zero.
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:That's right.
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:Right?
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:Interest rates- That's right … are
supposed to be at, you know,
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:three and a half, 4%, right?
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:Yep.
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:So I think during that time period when
interest rates were zero, there was a lot
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:of dislocations, things that shouldn't
be happening were happening, and so on.
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:So speaking of oil-
Yeah … what's $100 barrel of oil?
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:Just a few- What's the impact?
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:Just a few things been
happening in oil lately, right?
316
:Yeah.
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:Just a couple of things.
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:A few headlines out there.
319
:What impact does that have on energy?
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:Obviously, the price, as an
investor, you're like, "Wow,
321
:this is great for my portfolio."
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:Yeah.
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:Yeah.
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:It, it's gonna impact different
sub-sectors differently, and, and
325
:really how much they take the commodity,
um, you know, front month risk.
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:And so I s- I say that, but I think
the bigger issue is how much has
327
:this conflict kinda moved the curve?
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:'Cause that's where, you know,
the companies are gonna make their
329
:long-term investment decisions
on and, you know, what they maybe
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:spend, what they ultimately bring
to market in terms of production.
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:And so this is 80- oil was at $85,
you know, middle of last week.
332
:So this…
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:That's like dated information
with how fast things are-
334
:Yeah … moving at this point.
335
:But what I was looking at was
how much has the curve moved?
336
:And, and when you looked at the nine
months remaining for the rest of
337
:the year, the curve on average, so
each monthly delta had moved $12.
338
:That's gonna be very profitable for
all of the, the energy industry.
339
:Um, you know, I, I saw a
stat that they're gonna…
340
:that the, the integrators are gonna
make $5 billion in profits in margin.
341
:Is that sustainable?
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:This…
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:The, the gyration, I, I'd say
is not, it's not healthy for
344
:the, for the broader economy.
345
:And actually, if you have prices
that get too high, you end up having
346
:demand destruction, and that ends up
putting you into a recession, and then
347
:that's not good for anybody, right?
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:'Cause then all of a sudden
you don't have the demand, the,
349
:the supply has nowhere to go.
350
:You…
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:We don't wanna go there.
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:Right.
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:But, but certainly I'd say it, you
know, the improved prices, um, are,
354
:are healthy for the energy sector.
355
:What I would say is,
is, you know, notable.
356
:Why haven't they, the prices
moved alongside of crude?
357
:And, and, you know, the market discounts
what, what prices will be in the future.
358
:And so that's, you know, just because
front-month prices have gone up $30,
359
:it doesn't mean the whole curve's
gone up $30 over, over the rest of
360
:the year and, and, and outer years.
361
:Mark, that's fantastic.
362
:Really great information.
363
:So this probably is, might be a
question there's real no answer.
364
:Is there a sweet spot to oil?
365
:Like $100, like you said, once it
gets above too high, then all of a
366
:sudden you have that destruction of
GDP, nobody's spending and so on.
367
:Yeah.
368
:Is there like a sweet spot?
369
:You don't want it too low.
370
:Yep.
371
:Um, or a range.
372
:Yep.
373
:60 to 90 is kind of the,
the comfortable range.
374
:Um, and so I would say, you know, once
you get above 90, you know, I don't,
375
:I don't think you're seeing demand
destruction, but, you know, someone's
376
:gonna start getting pinched and it's
probably gonna be the, the consumer
377
:with, um, at, at the pump, right?
378
:And so, you know, the energy, the
energy industry, you know, starts to get
379
:portrayed in, in a more negative light.
380
:On, on the, the lower range, if you're
below 60, all of a sudden, you know,
381
:our, our, our curves, um, from, you
know, what the companies can drill
382
:at, can they be profitable at $55?
383
:It starts to, you know, creep
into their profitability and, and
384
:so they may not, you know, bring
as much production, um, online.
385
:And so I'd say 60 to 90 is
kind of that sweet spot.
386
:If y- if I had to pick a
number, it'd be 75, 80.
387
:Yeah.
388
:Okay.
389
:So.
390
:I like it.
391
:Pick a number.
392
:I'm gonna hold you to that, Mark.
393
:And when we talk next and, you
know, have you back on in a year,
394
:we'll g- we're gonna revisit it.
395
:Wonderful.
396
:Awesome.
397
:Wonderful.
398
:Mark, great conversation.
399
:Thank you so much.
400
:Really fun.
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:Energy, oil, really hot topic right now.
402
:So really glad you brought, came on,
joined, um, shared such great information.
403
:Where can our audience get more
information about Tortoise Capital?
404
:Yeah.
405
:G- go, go to our website,
tortoisecapital.com.
406
:Um, you know, we, we have, uh,
our marketing machine is, you
407
:know, cr- creating content.
408
:Um, you know, really
differentiated content.
409
:We wanna talk to you about what the market
is, what is happening in the market.
410
:Um, you know, give the, give the
up-to-date views as well as just
411
:educate you, um, you know, on, on, on,
on the, um, the products that we have.
412
:Yeah, Mark.
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:I, I know a lot of people out there are
gonna probably disagree with this, but I
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:actually do do some, uh, research in my
preparation, and I've gone to Tortoise.
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:Great website.
416
:You do have a lot of content out there.
417
:I learn a lot from it, so-
Good … can't recommend it enough.
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:Thank you, Mark.
419
:And thank you everyone for
listening to this episode of
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:Zephyr's Adjusted for Risk podcast.
421
:You can watch all of our other episodes
on the Zephyr YouTube channel, Spotify.
422
:Please be sure to like and follow and
give us a, uh, follow on LinkedIn.
423
:Thank you very much, and have
a great rest of your week.
424
:Get started.
