With the dramatic fall in energy prices last year, many funds that promised to reap the benefits of America’s natural gas renaissance turned out to be full of hot air.

Hennessy Gas Utility (ticker: GASFX ) wasn’t one of those: While the price of natural gas tumbled 29% in 2014 and the S&P energy index fell 8%, the fund gained 21%. While it trailed the Standard & Poor’s 500 as a whole (given the fund’s energy bent), that’s not often the case. The fund, which gets a five-star rating from Morningstar, has outperformed the S&P 500 and its peers in the past five-, 10- and 15-year periods, ranking at the top of its category.

Its success is tied to its focus on natural gas distribution: While exploration and production companies take a beating when natural gas prices fall, lower prices often cause a spike in demand, which helps the delivery man even as it hurts the producer. Plus, natural gas’ position as one of the “cleanest” traditional fuels also helps.

When Barrons.com last highlighted the fund, in 2013, the shale revolution was underway in the U.S. Yet the subsequent dramatic drop in commodity prices hasn’t dented the fund, which still earns the highest rank in its category for the past five and 15 years.

It’s the only fund pegged to the American Gas Association Stock Index, which weights its holdings by the percentage of their business tied to natural gas. But that doesn’t mean that its managers’ hands are tied. “We’re allowed to not do stupid things,” says Skip Aylesworth, who sagely sold out of Enron instead of passively following it to zero. “It’s all the benefits of standard indexing with an overlay of common sense.”

Manager’s Bio

Name:  Winsor “Skip” Aylesworth 
Age: 67
Title: Co-portfolio manager  
Education:B.S. and M.S. in meteorology, Florida State University; M.B.A., DePaul University
Hobbies:  Traveling  

Highlights from his conversation with Barrons.com are below.

Barrons.com: Many people don’t think of Warren Buffett as being in the natural gas business, but you own Berkshire Hathaway ( BRKB ).

Aylesworth: He actually has two subsidiaries. One is MidAmerican Energy, and the second one is PacifiCorp. These companies provide natural gas to the home and transport natural gas through interstate and pipelines. So he is primarily involved in the distribution of natural gas.

Interestingly, he owns Burlington Northern, which is exploring using natural gas to fuel long-distance freight trains. A year ago, before the decrease in oil, diesel fuel for a freight train was $4 a gallon; the equivalent of natural gas would be 75 cents a gallon. I can’t speak specifically of what he is involved with, but I think he is looking at the big picture and the use of natural gas through many of his subsidiaries.

Q: Two Canadian companies, TransCanada ( TRP ) and Enbridge ( ENB ) are your top holdings.

A: TransCanada is primarily involved with two big pieces of business: pipelines and electricity generation. They’re a very large electric producer in Canada, primarily with hydroelectric plants as well as gas fired plants, and they have a pipeline system to carry natural gas east-west across Canada and north-south, into the U.S. and actually down to Mexico. They should be looked at as a North American pipeline company -- Keystone just happens to be one [of their pipelines].

Fund Facts

(as of Feb. 27, 2015)

Hennessy Gas Utility (GASFX)
Assets:  $2.3 billion
Expense Ratio: 0.77%
Front Load:  None
Annual Portfolio Turnover:  20%
Yield: 2.06%

Source: Morningstar

Q: So the latest Keystone pipeline news of President Obama’s veto is hardly a death knell for the stock.

A: Not at all. TransCanada is working on solutions to bypass [the portion that was vetoed]; they have most of the pipeline built other than this, and of course ultimately they can also bring the oil sands of Western Canada to the ports. They’re a fine, healthy company and, yes, this is a hiccup, and they would love to see Keystone happen. But it is just a part of their business.

Enbridge is somewhat similar, but they don’t produce electricity; they are a pipeline company. They are involved a little bit in the oil and gas exploration in Western Canada. But they are another very large North American pipeline company bringing energy from Canada into the U.S.

Q: Williams Cos. ( WMB ) was a recent addition to the portfolio.

A: Williams Cos. is a general partner to master limited partnership Williams Partners (WPZ ), and that means that they are the manager. They own pipelines, processing plants. They are one of the largest involved in this business. They are not so much the company that connects the natural gas to the house; they are the ones who collect the natural gas at the well, take it through a processing plant, and put it in interstate pipelines to get it to regions of the country. They are a prime example of a company that, as more natural gas is used, more natural gas will go through their pipelines and their revenue should go up.

Q: Could rising interest rates hurt interest in its MLP though?

A: In my personal opinion, the MLP structure is really geared as almost a pure income approach. Normally the general partner will pay less, is more a total return type of investment. So in a rising rate environment, the MLP will probably be a little more sensitive to the rising rates, while the general partner is probably a little less sensitive. We own the general partners, probably about six or seven, and no MLPs in the fund. It is the general partners that join the American Gas Association.

Top 10 Holdings

(as of Dec. 31, 2014)

TransCanada(TRP)
Enbridge(ENB)
Kinder Morgan(KMI)
Williams Cos.(WMB)
Spectra Energy(SE)
Cheniere Energy(LNG)
Dominion Resources(D)
National Grid  ADR*(NGG)
Sempra Energy(SRE)
NiSource (NI)

*American depositary receipt 
Source: Morningstar

Q: New Jersey Resources ( NJR ) is a mid-cap stock you own.

A: Historically limited to New Jersey, they were the guy to bring the gas to the house. So, for many years you’d call them the local gas guy, but over the last five to six years they have become much more diversified. They’re involved in pipelines and storage now. They have a green energy segment; they have some solar and wind power facilities. They are also involved in providing natural gas fueling stations for natural gas powered trucks and cars. So that’s what makes them a potentially interesting individual investment.

Q: Are there any stocks you’d like to highlight?

A: Cheniere Energy ( LNG ) got started back in 2000 when people were worried that we were going to have a natural gas shortage and would have to import a lot of liquid natural gas. Cheniere got its start by building import facilities along the Gulf Coast, and it took a lot of money. But by the time it all came onboard, the market had totally turned. We had a surplus. We weren’t importing, and the stock price dropped to as low as $3 a share. It was almost an Enron. But I didn’t sell it. All of a sudden we now have all this surplus, and now there is talk that we are going to export liquid natural gas around the world.

Q: And a port works both ways.

A: Well the ports work both ways, but with the processing plants to liquefy the natural gas you cannot turn on the switch and go backward and freeze it. So they started to build new processing plants, and they are just now starting to come online this year. So Cheniere will now be the first of many in line to begin exporting liquid natural gas later this year, beginning of next year. The stock went from $3 to over $70 today. They’re of course hoping that the market doesn’t turn on them again. But our gas today is well under $3 a million BTU [British thermal unit]. You can sell that gas in Europe for up to $10, and you can sell it in Asia for $13 range, so there is a pretty good profit spread, even with processing and transportation costs.

Q: Thanks.