Exchange traded funds that track master limited partnerships, or MLPs, help generate attractive yields and will provide investors with exposure to long-term infrastructure expansion.
“MLPs have been under followed but are now getting a lot of attention,” Kenny Feng, CEO & President at Alerian, said in a webcast hosted by ALPS, which sponsors Alerian MLP ETF (NYSEArca: AMLP).
Looking at benchmark 10-year Treasury yields of about 1.6%, it is no wonder investors are beginning to branch out to alternative income-generating assets. Feng projects that the average spread between MLPs and the U.S. 10-year Treasury notes will remain between 3 and 5 percentage points.
MLPs build, acquire and operate transportation assets. While MLPs are associated 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.
Investors should think of MLPs as a toll-road business based on how much traffic goes through, Feng explained.