Consolidation Sparks Activity in MLP ETFs

The Alerian MLP ETF (NYSEArca: AMLP), the largest MLP-related exchange traded fund, and rival MLP ETFs saw increased activity to start amid deal-making in the sector. On Aug. 1, Energy Transfer Equity LP (NYSE: ETE) said it is buying Energy Transfer Partners LP (NYSE: ETP) for $27.5 billion.

Units of Energy Transfer Partners, the firm being acquired, jumped more than 14% last week. Energy Transfer Equity also finished last week higher by more than 3%.

“The $10.4 billion Alerian MLP ETF, known by its ticker AMLP, took in almost $36 million on Thursday, its first inflows since June. The fund tracks master limited partnerships, which combine the tax treatment of a partnership with a publicly traded firm,” reports Bloomberg.

MLPs don’t make their money based on oil or gas prices. Unlike other energy sector stocks, MLPs primarily deal with the distribution and storage of energy products, so their business model is less reliant on the commodities market since MLPs profit off the quantity of oil and natural gas they are able to move around.

More M&A?

In recent years, MLPs have been looking to reduce corporate complexity and shore up their balance sheets, an effort that has included rolling up their general partners and related entities into the larger parent company.