Global X Adds MLP ETF to Lineup
April 20th 2012 at 3:00pm by Tom Lydon
Income seekers have a new option available as Global X Funds, a provider of specialized exchange traded fund products, launched a new low-cost master limited partnership fund on Thursday.
Global X MLP ETF (NYSEArca: MLPA) tries to reflect the performance of the Solactive MLP Composite Index, which is comprised of U.S. MLPs that engage in the transportation, storage, processing, refining, marketing, exploration, production and mining of natural resources.
MLPs typically cover the energy industry. They own and operate infrastructure in the supply chain of energy products. Since they get paid by the amount of services they provide, commodity prices have a lesser affect on MLP revenues. To qualify as an MLP, the partnership is also required to pay out the majority of its operating cash flows as quarterly distributions, which make MLPs very attractive as income streams. [MLP ETFs Attract Yield Hunters]
The asset class has also historically shown low correlations with the broader market, providing investors with a portfolio diversifier.
According to a press release, the MLPA fund maintains a low expense ratio of 0.45%, compared to the industry average of 0.85%.
“The Global X MLP ETF provides cost effective access to the MLP sector with a much lower fee than the industry average,” Bruno del Ama, chief executive officer of Global X Funds, said in the press release.
The fund has 30 holdings, including Magellan Midstream Partners at 5.2%, Plains All American Pipeline at 5.1% and Buckeye Partners at 5.1%. Overall, the fund’s component stocks are more or less evenly spread out.
Sector allocations include natural gas pipelines 41.4%, petroleum transportation 39.5%, exploration & production 7.0%, refining/distribution 6.9% and coal production 5.3%.
MLPA doe snot require a K-1 form come tax season. Investors will only need to fill out a 1099 tax form. Additionally, the ETF may be used in an IRA or 401(k) plan.
The new MLP ETF will compete with other funds, like the ALPS Alerian MLP ETF (NYSEArca: AMLP), which has an expense ratio of 0.85%, and the JP Morgan Alerian MLP Index ETN (NYSEArca: AMJ), which has an expense ratio of 0.85%. [High Income MLP ETF Launches]
For more information on master limited partnerships, visit our MLPs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.