Exchange traded funds and exchange traded notes tracking
master limited partnerships rebounded Friday, recovering some of
the ground lost in a recent drubbing that likely came courtesy of
elevated fiscal cliff fears.
As the Federal Reserve has acted to keep interest rates low
over the past several years in an effort to stimulate economic
growth, MLPs have become a favorite asset class of income-starved
investors. ETF issuers have responded to increased demand for MLP
exchange-traded products by rolling out several new
and ETNs over the past two years.
MLPs are tax-efficient vehicles prized by investors for high
yields and steadily rising dividends. Many MLPs pay dividends on
a monthly basis, but it is the status of MLPs as dividend
securities that has plagued the group in recent weeks.
MLPs have also been hit by fears about lofty valuations and
speculation politicians, in an effort to generate much-needed
could revoke the special tax treatment
that has made MLPs so appealing. The valuation concern is not new
and it is one the asset class has previously shrugged off.
Currently, MLPs do not pay corporate taxes and dividends from
these firms are not considered taxable income. Any move by
politicians to unfavorably change MLP tax structure would likely
be viewed as punitive to the asset class.
As fears of the fiscal cliff, which would include the
expiration of Bush-era dividend tax cuts, have soared, MLP ETFs
and ETNs have suffered. The JPMorgan Alerian MLP Index ETN (NYSE:
), the largest MLP exchange-traded product by assets, had plunged
8.6 percent from November 7 through November 15. The ALPS Alerian
MLP ETF (NYSE:
) has not been a peach, either, with a loss of almost seven
On Friday, buyers stepped into, sending some MLP ETFs and ETNs
soaring. On better than double the average daily volume, AMJ was
up over 3.3 percent in late trading. AMLP was higher by 1.8
percent on strong volume as well.
The Yorkville High Income MLP ETF (NYSE:
), which has attracted $79 million in assets under management
since its March debut, had 13.3 percent since November 7. YMLP is
taking a small bite out of that loss today with a three percent
gain on volume that is more than double the daily average.
The First Trust North American Energy Infrastructure Fund
), which has proven to be among the sturdier MLP ETFs in recent
weeks, gained 1.7 percent today on volume that was also better
than double the daily average. On an anecdotal level, the First
Trust North American Energy Infrastructure Fund paints the
picture of just how popular MLP ETFs and ETNs are with investors.
EMLP debuted in June and it has already eclipsed $103 million in
assets under management,
according to First Trust data
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