Expanding on its successful master limited partnership investment strategy, ALPS has filed with the Securities and Exchange Commission to launch an MLP-related fund that avoids the double tax bite associated with the C-Corporation structure.
According to a recent filing, the Alerian Energy Infrastructure ETF will try to reflect the performance of the Alerian Energy Infrastructure Index, which is comprised of 30 U.S. and Canada companies engaged in the transportation, storage and processing of energy commodities, or “midstream energy businesses.”
Specifically, the index includes master limited partnerships 25%, U.S. MLP affiliates taxed as corporations 30%, Canadian MLP Affiliates taxed as corporations 10%, U.S. energy infrastructure & power companies taxed as corporations 15% and Canadian energy infrastructure companies taxed as corporations 20%.
Within each sub-sector, component holdings are equally weighted.
The new fund’s MLP holdings are specifically limited to under 25%. In comparison, ALPS also offers the largest MLP-related ETF, the Alerian MLP ETF (NYSEArca: AMLP), which is structured as a C-corporation and incurs a deferred tax liability out of the returns every day. Consequently, some argue that AMLP has an expense ratio closer to 5% – 0.85% base expense ratio plus 4% fees listed as “other expenses.” [A Closer Look at Master Limited Partnership ETFs and ETNs]