MLP ETF investing has surged in popularity in recent years as
a host of new products hit the space. Funds now exist that target
various subsets of the Master Limited Partnership world with ones
that zero in on high yield, natural gas, infrastructure, among
However, there has been one corner of the MLP world that has
remained strangely overlooked despite the clear interest by
investors for the space; small caps. This looks to change now
though, as Global X has just released a
Junior MLP ETF (
which looks to offer up first of its kind exposure to pint-sized
MLPs in exchange-traded fund form (read
MLP ETFs: Unfortunate Victims of the Fiscal
This brand new ETF tracks the Solactive Junior MLP Index,
giving exposure to small cap MLPs. The product has 25 stocks in
its basket, and charges investors 75 basis points a year in fees
for its exposure.
In terms of the basket, exploration and production accounts
for just under 44%, trailed closely by energy transportation
& storage which makes up about 40% of assets. Top holdings
are all below 7% of assets, with
Suburban Propane Partners (
Northern Tier Energy (
Alliance Resources Partners (
rounding out the top three and all accounting for at least 6.5%
of the ETF each.
Why Small Caps?
Small cap MLPs could be an interesting play at this time as
they could allow investors to still play solid trends in the
space, without purchasing some of the more bid up names in the
large cap domain. After all, these large caps have seen huge
levels of inflows in the past few years-thanks in part to ETF
demand-so small caps may be better positioned for the road ahead
Three Impressive Small Cap Dividend ETFs
This particular ETF also looks to be more focused in on
exploration and processing, something that investors don't really
see in large cap products. In these funds, like with
focus is much more on the 'toll-road'
business model which is arguably less prone to volatility than
what investors might see in MLPJ.
MLPJ may also be an interesting play for those seeking a wave
of M&A activity in the space. As companies look to
consolidate, the move towards small caps in order to shore up
supply lines or explore for more hydrocarbons could become a very
popular theme in 2013 in beyond (read
Can You Beat These High Dividend ETFs?
"We are pleased to offer the first and only ETF that provides
access to the rapidly growing junior MLP market," said Bruno del
Ama, chief executive officer of Global X Funds, in a press
release. "MLPJ uniquely meets investor demand for both income and
growth in the energy space."
The boom in the MLP market has definitely transferred over
into the ETF world as well, as many MLP products are extremely
popular. In fact, only four have less than $50 million in total
assets, while on the flipside, two have at least one billion in
AUM and two more have at least $300 million in assets.
Clearly, given the low level of competition in the small cap
space, Global X could find a way to establish a reasonable level
of assets in the market. It is worth pointing out though, that
their other MLP ETF, MLPA, is one of the few that doesn't have a
big following, so it is by no means a sure thing (also read
The Truth about Low Volume ETFs
Yet given the huge demand for MLP products and the potential
for small caps as acquisition targets, this could definitely
change for MLPJ, meaning that Global X could certainly have a
winner on its hands with its latest commodity focused ETF.
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ALERIAN-MLP (AMLP): ETF Research Reports
ALLIANCE RES (ARLP): Free Stock Analysis
GLBL-X MLP ETF (MLPA): ETF Research Reports
(MLPJ): ETF Research Reports
NORTHERN TIER (NTI): Free Stock Analysis
(SPPH): ETF Research Reports
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