From the June 2012 issue of Research Magazine • Subscribe!

Investing in Energy MLPs

A new ETF from Global X Funds focused on master limited partnerships (MLPs) in the energy sector has been launched. The Global X MLP ETF (MLPA) tracks the Solactive MLP Composite Index, which currently contains 30 component companies. Energy Transfer Partners (ETP), Enterprise Products Partners (EPD) and Plains All American Pipeline (PAA) are among the top three holdings inside the Global X MLP ETF.

MLPA will compete head-to-head with other ETPs in its category like the ALPS Alerian MLP ETF (AMLP) and the JP Morgan Alerian MLP ETN (AMJ).

Energy MLPs are owners and operators of key pieces of infrastructure involved in this supply chain, and as a result may stand to benefit from continued energy use and additional investments in U.S. energy infrastructure.

Many energy MLPs operate a toll-road model for generating revenues, which generally creates a stable revenue stream and has less direct correlation to commodity prices. 

Historically, MLP returns have not been highly correlated with the overall U.S. stock market. 

MLPA includes 1099 tax reporting (no K-1s), qualified dividends and plans to pay quarterly income distributions.

“The Global X MLP ETF provides cost effective access to the MLP sector with a much lower fee than the industry average,” said Bruno del Ama, chief executive officer of Global X Funds. MLPA carries an annual expense ratio of 0.45%.

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