Master Limited Partnerships: High-Yield Sector Gets Small-Cap ETF
January 15th, 2013 at 2:10pm by Tom Lydon
Exchange traded fund providers are dishing out more master limited partnership funds as a way to appease the growing demand for yield. While already offering an MLP related ETF of its own, Global X on Tuesday launched one aimed at capturing the small-cap segment of the industry.
Global X, which offers the Global X MLP ETF (NYSEArca: MLPA), listed the Global X Junior MLP ETF (NYSEArca: MLPJ) Tuesday. MLPJ will be the first and only ETF to target the small-cap companies in the MLP industry.
The fund is the second MLP exchange traded product to launch this month, following iPath S&P MLP ETN (NYSEArca: IMLP). [Master Limited Partnerships Yielding Over 5% Get Another ETF]
“As the energy infrastructure in North America continues to expand, smaller capitalization MLPs often control increasingly important energy assets and are active in the exploration, transportation and storage of domestic energy resources,” Global X said. “Because many of these companies are not included in major MLP indices, in many cases they have not experienced the same price growth as their larger counterparts and may offer value at current levels.”
MLPJ will track the Solactive Junior MLP Index, which is comprised of companies with a market cap ranging from $200 million to $2.5 billion, and includes 25 holdings. It comes with a 0.75% expense ratio.
Top holdings include Suburban Propane Partners 6.8%, Northern Tier Energy 6.6%, Alliance Resources Partners 6.5%, TC Pipelines 6.4% and Natural Resource Partners 6.3%.
Subsector allocations include exploration & production 44%, energy transportation/storage 39.5%, refining/distribution 13.4% and energy equipment 3.2%.
MLPs build, acquire and operate transportation assets. While investors link MLPs with energy, specifically natural gas and crude oil, they are more involved with transporting the commodities. Consequently, the performance of MLPs is less dependent on commodity prices than on how much of the commodity is pushed through. [Master Limited Partnerships]
According to a Global X note, the International Energy Association calculates that the U.S. will become the world’s largest oil producer by 2017 and a net exporter of natural gas by 2020. MLP related funds will capture the build up in energy infrastructure to meet the exploration, production, transportation and storage demands as the country goes through its energy growth spurt.
Some other MLP funds include:
- ALPS Alerian MLP ETF (NYSEArca: AMLP)
- First Trust North American Energy Infrastructure Fund (NYSEArca: EMLP)
- Yorkville High Income MLP ETF (NYSEArca: YMLP)
- JP Morgan Alerian MLP Index ETN (NYSEArca: AMJ)
- Credit Suisse Master Limited Partnerships ETN (NYSEArca: MLPN)
For more information on new product launches, visit our new ETFs 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.