New ALPS Energy Infrastructure ETF Debuts
November 1st, 2013 at 11:27am by Todd Shriber
Denver-based ALPS introduced the Alerian Energy Infrastructure ETF (NYSEArca: ENFR) today, an ETF designed to give investors exposure to energy infrastructure firms as well as high-yielding master limited partnerships (MLPs).
The Fund provides exposure to the Alerian Energy Infrastructure Index, which is intended to give investors a transparent and intuitive means of tracking the overall performance of the North American Energy Infrastructure sector. The Index is comprised of equity securities of issuers headquartered or incorporated in the U.S. and Canada, according to a statement issued by ALPS.
ENFR takes a similar approach to the actively managed First Trust North American Energy Infrastructure Fund (NYSEArca: EMLP) and the newly minted Global X MLP & Energy Infrastructure ETF (NYSEArca: MLPX) which is to cap exposure at 25%. [How MLP ETFs Impact Returns]
MLP ETFs that hold more than 25% of their portfolio in MLPs are structured as C-Corporations in order to track an underlying MLP-related index. Due to the C-Corporation structure, they must pay corporate income tax on distributions before passing them to investors. Consequently, MLP ETFs may incur higher fees that would cut into overall performance, leading to an underperformance compared to the underlying benchmark. [MLP ETFs Try to Address Tax Headaches]
ALPS has already had success with MLP ETFs. The ALPS Alerian MLP (NYSEArca: AMLP) debuted just over three years ago and now has almost $7 billion in assets under management, making it the largest MLP ETF.
“The Alerian Energy Infrastructure ETF is a product that will allow investors to access 30 core companies that transport, store, and process energy resources across North America,” said Kenny Feng, Alerian’s President and CEO, in the statement. “We believe these companies will be instrumental in the energy infrastructure build out necessary to achieve energy independence by 2030.”
ENFR’s underlying index is home to 30 companies with the top-10 holdings combining for 43.4% of the index’s weight. The index has a correlation of 0.59 to the S&P 500, according to issuer data. The new ETF has an annual expense ratio of 0.65%.
Top-10 holdings in the new ETF include Enbridge (NYSE: ENB), TransCanada (NYSE: TRP), Williams Cos. (NYSE: WMB) and Magellan Midstream Partners (NYSE: MMP).