Although equities have had a nice run in the past few months,
oil prices have not kept up. Crude oil remains stubbornly around
the $90/bbl level in WTI terms, and it shows no sign of breaking
out in the near future thanks to a strong dollar.
While this situation has certainly had a negative impact on
those invested in the commodity, it hasn't been nearly as bad for
and especially those in the MLP ETF space. These securities have
had a banner start to 2013, and have actually outperformed the
S&P 500 by a pretty wide margin.
In fact, MLP ETFs have actually led the way higher in the
traditional energy space, pushing many investors to consider this
often overlooked asset class (also read
3 Red Hot Dividend ETFs
If anything, MLPs' popularity can largely be thanks to
ETFs/ETNs and how they have opened up this market to investors.
Now, there are more than a dozen products targeting the broad
space, giving investors a wide variety of choices in the MLP
The latest product to hit this market comes to us from
Barclays in ETN form. Their
Barclays ETN+ Select MLP ETN (
offers up yet another way to target this increasingly in focus
market, albeit in a slightly unique style.
ATMP in Focus
The ETN looks to track the Volume-Weighted Average price level
of the Atlantic Trust Select MLP Index. This benchmark is
designed to provide investors exposure to midstream American and
Canadian master limited partnerships, LLCs, and corporations in
the MLP space (read
How to Play the MLP ETF Space
These must trade on major U.S. exchanges and meet certain
eligibility criteria such as long-term credit ratings, cash flow
percentage derived from midstream operations, and average daily
trading value. It is also worth pointing out that the note can
consist of both limited partnership interests and general partner
interests as well.
The product looks to charge investors 95 basis points a year
in fees, in line with other products in the space. Lastly,
interests in limited partnerships will be limited to 8% each,
while general partnerships will have a ceiling of 4% for each
individual holding, so assets should be well spread out.
How does it fit in a portfolio?
This ETN is probably appropriate for those investors who are
seeking a relatively high income play that is capable of strong
returns in the MLP space. The note's underlying index,
according to Barclays' research
, has had higher annualized returns and lower annualized
volatility than two key Alerian benchmarks in the space (see
3 Excellent ETFs for Income Investors
Still, investors should note that the average yield for the
underlying index of ATMP has been lower than either of the
Alerian MLP benchmarks highlighted. This could make ATMP a poor
choice for those who put a premium on yield above all other
aspects in the MLP space.
Investors should also note that this product is structured as
an ETN, so there is some credit risk in this investment. However,
this also eliminates tracking error and it helps to mitigate tax
issues, a problem that can be big in the MLP world for some
Can it succeed?
The MLP space is rife with competition including several
billion dollar products. These include the
JPMorgan Alerian MLP Index ETN (
Alerian MLP ETF (
, two products that are based on the aforementioned competitor
indexes to ATMP (also read
Yorkville Debuts High Income Infrastructure MLP
Due to their impressive sizes, both of these products see
robust trading volumes and may be difficult to unseat for new
competitors. Still, most MLP products in the space have seen
decent inflows and by most measures, can be considered successful
For this reason, I think that this new MLP ETN could see some
decent inflows and start to eventually rival others in the space.
The note already has $26 million in AUM after just a single day
on the market, so clearly there is a bit of interest in their
approach to the space.
The key will be if this new product can continue to outperform
on a price basis, far above what investors can obtain in other
corners of the MLP ETF world. If that is the case, it could make
up for the ETN's undersized yield and make this another viable
choice for investors in the MLP ETF segment.
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