UBS launched a master limited partnership exchange traded note (ETN) last week. The new fund is tied to a Wells Fargo index.
The UBS AG Exchange Trade Access Securities (NYSEArca: MLPW) is linked to the Wells Fargo MLP Index, according to the New York Stock Exchange IPO site.
UBS set the expense rate on the note at 0.85% to match that of a number of its competitors. Olivier Ludwig for Index Universe explains that many MLP products shoot off dividends of more than 6%, making them quite attractive at a time when interest rates are almost nothing and U.S. stocks remain somewhat volatile. [The First MLP ETF Is Here.]
Ludwig describes MLPs as being similar to tollbooths for commodities – they collect fees for transporting those products, but are mostly exempt from the effects of changing prices in those commodities. [Risks and Rewards of MLP ETFs.]
According to Morningstar, some of the benefits of owning an MLP include:
- High yield
- Consistent distributions
- Capital gains – that is, firms often switch to an MLP to avoid taxes; owners are taxed only once, and that’s on distributions
The new ETN is the latest addition in a growing line of MLP products, including Alerian MLP ETF (NYSEArca: AMLP), the first ETF aimed at the industry.
- Credit Suisse Cushing 30 MLP Index (NYSEArca: MLPN)
- UBS E-TRACS 2x Long Alerian MLP Infrastructure ETN (NYSEArca: MLPL)
Tisha Guerrero 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.