Master Limited Partnerships: MLP ETFs
April 25th, 2012 at 2:23pm by Paul Weisbruch, Street One Financial
The MLP space has received a jolt of innovation in recent weeks, as two new entrants to the ETF space have emerged. Yorkville High Income MLP (NYSEArca: YMLP) debuted in March of this year and even more recently, Global X MLP (NYSEArca: MLPA) launched just last week.
Master limited partnerships, or MLPs, are companies involved with the transportation and storage of commodities including oil and natural gas. They have high dividend yields.
Unquestionably, the MLP space has attracted significant investor attention over the past few years, as JP Morgan Alerian MLP Index ETN (NYSEArca: AMJ) has garnered more than $4 billion in assets under management since it was conceived in 2009. AMJ was followed by Alerian MLP ETF (NYSEArca: AMLP), which launched in August of 2010, and has also been tremendously successful, having raised more than $3 billion in a small timeframe. [Two More MLP ETFs in the Works]
YMLP tracks the Solactive High Income Composite MLP Index and seeks to isolate exposure to those MLPs that have historically paid out the highest distributions and the fund manager notes that high income MLPs can also “act as an inflation hedge as they are sensitive to commodity prices.”
Investors flocked to MLPs in the uncertainties that emerged in last summer’s steep equity market sell-off, as MLPs seemed to provide a safe harbor in that they have historically exhibited low correlations to stocks and bonds, and at the same time have provided attractive distributions of income to investors. MLPA tracks the Solactive MLP Composite Index and is priced as the “discount” offering in the space currently with an expense ratio of 45 bps.
YMLP is currently at 82 bps, whereas AMJ is 85 bps, and AMLP is also 85 bps. MLPA’s goal is to provide a proxy for the overall performance of U.S. listed MLPs, much like the Alerian Index attempts to do with AMJ and AMLP, and thus hopes to capitalize on its much lower expense ratio and carve into the massive assets that have accumulated in both AMJ and AMLP over the last several years.
JP Morgan Alerian MLP Index ETN