Exchange traded funds dedicated to high-yielding master limited partnerships (MLPs) have been struggling alongside traditional energy equities as oil prices are tumbling. However, there are incremental signs of life for MLP funds.
The Global X MLP & Energy Infrastructure ETF (NYSEArca: MLPX) gained more than 2% last week while the ALPS Alerian MLP ETF (NYSEArca: AMLP), the largest exchange traded fund holding MLPs, jumped 3% on the week.
MLPs are publicly traded partnerships engaged in the transportation, storage and processing of minerals and natural resources. 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.
“The current yield on MLPs stands at 7.12%. MLP yields remained higher than the broad market benchmarks for High Yield Bonds (5.41%), Preferreds (5.40%), Emerging Market Bonds (5.37%), and REITs (4.02%),:” according to Global X research. “MLP yield spreads versus 10-year Treasuries currently stand at 4.82%, higher than the long-term average of 3.69%.”
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.