A Look at a New MLP ETF

Master limited partnerships are among the income-generating asset classes that have been enjoying this year’s slide in U.S. Treasury yields. Interest rates that are still low by historical standards and with investors still hunting for yield, exchange traded funds tracking MLPs remain in demand. There are now more than 20 MLP ETFs and exchange traded notes (ETNs) on the market.

Issuers are meeting that demand with new product introductions, including the InfraCap MLP ETF (NYSEArca: AMZA), which debuted on Thursday. Although the market for MLP exchange traded products is growing and increasingly competitive, the InfraCap MLP ETF has at least one way of standing out from the crowd.

The new fund is the first actively managed ETF to offer pure play MLP exposure. The First Trust North American Energy Infrastructure Fund (NYSEArca: EMLP), which debuted in June 2012 and has since soared to $858.9 million in assets under management, is actively managed, but holds royalty trusts, pipeline companies, utilities, and other companies in addition to MLPs. [Long-Term Investors Love MLP ETFs]

“AMZA is structured to appeal to those who want to invest in the U.S. energy infrastructure industry and benefit from the ongoing oil and gas drilling renaissance.   The fund invests in midstream MLPs that are principally involved in the gathering, processing, transportation, and storage of crude oil, natural gas, natural gas liquids, and refined products. These volume based, ‘toll-road’ businesses typically generate and distribute substantial cash flow to their owners and represent a largely commodity insensitive investment in the domestic energy revolution,” according to a statement issued by InfraCap.

The new ETF is home to 31 holdings, including familiar names such as Kinder Morgan Energy Partners (NYSE: KMP), Markwest Energy Partners (NYSE: MWE) and Magellan Midstream Partners (NYSE: MMP). That trio combines for about 24% of AMZA’s weight, according to issuer data.