April 1, 2010

UBS Launches Alerian-MLP ETN

The ETN will track the change in value of the Alerian MLP Infrastructure Index and pass on the corresponding distributions from the underlying companies as a quarterly coupon.

"We are particularly excited to partner with Alerian and to offer the UBS E-TRACS Alerian MLP Infrastructure Index as it is the first time investors will have access to this market leading index," said Christopher Yeagley, managing director and U.S. head of equity structured products.

MLPs are publicly traded limited partnerships that unite the tax advantages of a partnership with the liquidity of a publicly traded stock.

The Alerian MLP Infrastructure Index is a leading index for investing in energy infrastructure. Because the revenues of energy infrastructure MLPs tend to be correlated with the demand for energy commodities rather than the price of energy commodities, MLPs in energy infrastructure industries have relatively consistent, predictable cash flows.

The Alerian MLP Infrastructure Index includes only midstream energy transportation and storage assets, and its methodology selects those energy infrastructure companies that are hard-asset focused. The index provides diversified exposure specifically to infrastructure investment.

"Trusted innovation and data integrity are the values that drive our benchmarks and data sets," said Alerian President and CEO Kenny Feng in a statement. "We are pleased that UBS has recognized the importance of independence and objectivity in the indices underlying its E-TRACS platform, and has turned to Alerian to provide the precision that only our proprietary databases can deliver."

The ETN will track the change in value of the Alerian MLP Infrastructure Index and pass on the corresponding distributions from the underlying companies as a quarterly coupon, net of fees. Unlike directly investing in MLPs, investors will not receive K-1s, but instead will receive one Form 1099 reflecting the distribution pass-through as ordinary income.

UBS has 12 other existing E-TRACS ETNs - 10 of which track the performance of various UBS Bloomberg CMCI indexes, like platinum, silver, gold, livestock, food, etc, one that tracks the total return of the Dow Jones-UBS Commodity Index, and one that is linked to the S&P 500 Gold Hedged Index.

UBS E-TRACs are senior unsecured notes issued by UBS AG, are traded like any other security on NYSE Arca, and can be bought and sold through a broker or financial advisor.

In related news, Alerian also announced a corporate rebranding to focus on its leading position as a provider of energy MLP indexing and analytics, and has also spun off its active management business as SteelPath Capital. Alerian does not give financial advice, and as such can provide truly independent indexing solutions for the energy MLP asset class.

The firm plans to continue the growth of its index family, expanding the depth and breadth of its data sets and analytics for clients as part of a broader corporate strategy to bring additional resources, focus, and personnel to its industry-leading MLP indexing business.

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