A High-Yield MLP ETF Strategy That Hedges Against Weak Oil

Master limited partnership exchange traded funds have been a good way for income-seeking investors to generate high yields, but the weakening energy prices have dragged on the market. In response, Amplify ETFs has come out with the first MLP-related ETF to actively hedge its exposure to oil prices.

On Thursday, Amplify ETFs launched the actively managed Amplify YieldShares Oil Hedged MLP Income ETF (BATS: AMLX). AMLX has a 0.85% expense ratio.

“We hedge against oil price declines when investing in MLPs to seek to reduce portfolio volatility and correlation to oil prices,” according to Amplify ETF.

Over the past decade during 80% of days where crude oil declined 2% or more, MLPs also saw a decline in value.

The active ETF is managed by Dustin Lewellyn, Chief Investment Officer of Penserra, whom has primary responsibility for implementing the ETF’s investment program and for the overall day-to-day management of the ETF. Ernesto Tong and Anand Desai, each a portfolio manager of Penserra, will serve as portfolio managers of the ETF and assist with the day-to-day management of the ETF.

AMLX invests in equity securities of energy MLPs and selectively hedges positions to limit the correlation of its performance to the price of West Texas Intermediate Crude Oil by including short exposure to oil futures contracts.

The majority of holdings will include MLPs associated with oil & gas production; integrated oil; oil refining/marketing; oilfield services/equipment; and oil & gas pipelines.


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