First Pure Actively-Managed MLP ETF Launched
One area of the ETF world that has continued to thrive is master limited partnerships, or MLPs. These alternative income-generating securities offer exposure to energy infrastructure, pipeline and storage businesses that return significant earnings to shareholders.
On October 2, Infrastructure Capital Advisors launched a competitive exchange-traded fund that is the first pure actively-managed portfolio of mid-stream MLP companies. The InfraCap MLP ETF (NYSE: AMZA) seeks current income and steady growth by investing in a diversified portfolio of energy companies.
AMZA will seek a total portfolio yield of 8.00 percent and will include 1099 tax report instead of the traditional K-1 that you would receive if you owned an MLP directly. In addition, this ETF will seek to generate qualified dividends that are payable quarterly to shareholders.
At launch, the largest holding in AMZA is Kinder Morgan Energy Partners LP (NYSE: KMP), which represents nearly 10 percent of the total portfolio. Companies such as KMP are traditionally less sensitive to changes in commodity prices because of their “toll road” style business models that derive steady cash flow.
According to the press release, this new ETF is designed to leverage the benefits of active management and proprietary internal research. Weightings are based on estimated total return and company fundamentals instead of market capitalization.
AMZA will be managed by Jay D. Hatfield, who has extensive experience in the energy infrastructure companies as a previous co-founder and general partner of an NYSE-listed MLP.
Mr. Hatfield stated, “We are pleased to introduce this innovative product in what we believe to be the early innings of the US energy infrastructure boom and to provide our investors with the benefit of active management and potentially superior returns.”
AMZA will compete with the well-established Alerian MLP (NYSE: AMLP), which has more than $9.5 billion in total asset and follows a passive index approach that captures 25 of the largest MLPs.
The First Trust North American Energy Infrastructure Fund (NYSE: EMLP) set a precedent for success in an actively managed portfolio of energy companies. This ETF invests in a basket of MLP and utility companies with more than $860 million in assets. EMLP has gained more than 18 percent so far this year on the strength of both asset classes.
Ultimately, AMZA gives MLP investors another vehicle to consider when constructing a portfolio to generate income, manage risk, or seek market-beating returns.
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