ETFs tracking master limited partnerships outperformed the S&P 500 in 2011 as investors favored income-producing sectors, but MLP funds are trailing the market so far this year in the risk-on environment.
ALPS Alerian MLP ETF (NYSEArca: AMLP) posted a total return of about 10% last year. The fund is up 1.6% year to date, while the S&P 500 has rallied 12.6%.
MLPs focus on the transportation, storage and processing of energy, including oil and natural gas. The companies enjoy tax breaks and are less sensitive to commodity prices than energy companies. [Master Limited Partnership ETFs]
JPMorgan Alerian MLP Index ETN (NYSEArca: AMJ) is an exchange traded note that covers the asset class. Also, Yorkville High Income MLP ETF (NYSEArca: YMLP) listed last month. [High Income MLP ETF Launches]
The MLP funds are lagging the S&P 500 this year with investors taking on more risk and focusing less on yield. Some investors use MLPs to diversify because of their low correlation with the stock market. [MLP ETFs Attract Yield Hunters]
MLP funds come with extra tax wrinkles that are important for investors to understand.
For example, AMLP, circumvents the K-1 filing procedure required for traditional MLP equity holdings, says investment researcher Morningstar.
“AMLP is structured as a C-corp for tax purposes and is taxed at the entity level. This causes a layer of double taxation for investors,” it said in an analyst report on the ETF.
ALPS Alerian MLP ETF
