The the rise of shale oil is producing “rapid growth in the industry,” Karpf said in the article. “MLPs are better able to handle capital spending requirements for U.S. industry. It’s no longer a sleepy industry.”
Investors can access the MLP space through exchange traded notes or ETFs, like the UBS ETRACS Alerian MLP Infrastructure ETN (NYSEArca: MLPI) and the Alerian MP ETF (NYSEArca: AMLP). As an unsecured debt instrument that replicates the return of the MLP index, the ETN vehicle is not subject to the double-taxation effects associated with a C-Corporation. ETNs, though, are subject to credit risk of the underwriting bank or issuer. [MLP ETFs Try to Address Tax Headaches]
Newer MLP-related ETFs limit MLP holdings to 25% of the total portfolio. For instance, First Trust introduced the actively managed First Trust North American Energy Infrastructure Fund (NYSEArca: EMLP), the first RIC-compliant MLP product, limits MLP holdings to 25% and includes other energy infrastructure firms with similar characteristics to MLPs. Additionally, the newer Global X MLP & Energy Infrastructure ETF (NYSEArca: MLPX) and he Alerian Energy Infrastructure ETF (NYSEArca: ENFR) to also limit holdings of MLPs. [How MLP ETF Structures Affect Yields and Returns]
For more information on master limited partnerships, visit our MLPs category.
Max Chen contributed to this article.