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Celebrate American Energy Independence With This New ETF

Celebrate American Energy Independence With This New ETF
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Thanks to the shale boom, the U.S. is major player on the global energy stage. By some accounts, the U.S. is now a net oil exporter. Investors can celebrate that new found energy independence with a new exchange traded fund, the American Energy Independence ETF (NYSE:USAI).

The American Energy Independence ETF debuted Thursday courtesy of SL Advisors. USAI is the firm's first ETF. The new ETF tracks an index developed by SL Advisors.

“Our energy infrastructure exchange traded fund seeks to track the American Energy Independence Index,” said SL Advisors. “Growing production of crude oil, natural gas and natural gas liquids is increasing the need for new infrastructure to move, process and store this output. We anticipate that as the U.S. becomes ever more energy independent, North American infrastructure businesses should benefit.”

More About USAI's Index

USAI follows the American Energy Independence Index. That benchmark holds U.S.- and Canada-based energy infrastructure companies, including master limited partnerships and general partnerships.

The index is home to 28 stocks with a median market value of $7.4 billion. The top 10 holdings combine for 64.5 percent of the benchmark's weight, according to issuer data.

“USAI provides exposure to the support systems that sit between the wellhead and the customer, which are critical to harnessing these important resources,” according to SL Advisors. “The American Energy Independence ETF (USAI) provides exposure to the infrastructure that moves these growing energy supplies to market.”

Yield Play

Income investors are often fans of MLPs due to the asset class having high dividend yields compared to traditional integrated oil firms. Additionally, MLPs historically aren't highly correlated to oil prices. However, that isn't a guarantee of downside protection when oil prices or the broader energy sector struggle.

Energy is the worst-performing group in the S&P 500 this year, but the Energy Select Sector SPDR (NYSE: XLE) is down about 7 percent, just half as bad as the decline for the Alerian MLP Infrastructure Index.

USAI looks to keep its MLP holdings to below 25 percent of the overall portfolio. MLP ETFs that exceed that number are no long registered investment company compliant and risk putting investors in position for significant tax bills, which drive the total cost of fund ownership higher.

USAI charges 0.75 percent per year, or $75 on a $10,000 investment.

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