Master limited partnerships (MLPs) are one asset class that has benefited in a big way from several years of rock-bottom U.S. interest rates. With piddly yields on U.S. government bonds and cash instruments, income investors have sought alternative yield-generating securities and MLPs have been among the prime destinations.

Issuers of exchange traded products have obliged investors’ demands for MLP products and investors have validated many of the MLP ETFs and ETNs that have come to market as inflows data confirm. Through the first half of this year, investors poured $8 billion into MLP mutual funds, ETFs and ETNs. [The 411 on MLP ETFs]

While some MLP ETFs are undoubtedly popular with income investors, some of those investors may not realize select MLP ETFs do not fall under the purview of the Investment Company Act of 1940. That legislation dictates investment products structured as “funds,” such as ETFs and mutual funds, are treated as pass through vehicles. MLP funds run afoul of that structure and can be taxed at the federal and state levels because the funds are structured as C-corporations.

The First Trust North American Energy Infrastructure Fund (NasdaqGS: EMLP) is one “almost” MLP ETF that helps investors avoid unpleasant tax surprises by capping its MLP holdings to under 25% to meet regulatory rules while holding other energy infrastructure stocks through subsidiaries.

The strategy has worked for EMLP because at just 14 months old, the fund has $411.2 million in assets under management. That tally is good enough to rank the First Trust offering among the more successful actively managed ETFs on the market.

In addition to MLPs and affiliate firms, EMLP “Canadian income trusts and their successor companies, pipeline companies, utilities, and other companies that derive at least 50% of their revenues from operating or providing services in support of infrastructure assets such as pipelines, power transmission and petroleum and natural gas storage in the petroleum, natural gas and power generation industries,” according to First Trust.

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