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.
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. Consequently, MLPs have historically shown a weaker correlation to energy prices over longer periods as MLPs act more like energy toll roads, profiting on the volume of oil moving through their pipelines.
“The ETF’s largest holding is Energy Transfer Partners, which comprises 11.6 percent of its exposure. The fund lost a record $636 million in assets in July, as energy firms battled to cut distributions to shareholders in order to stabilize their balance sheets and simplify their operations,” according to Bloomberg.
Shares of AMLP gained nearly 3% last week.
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