Global X Funds, the New York-based fund provider known for niche
strategies, is expected to launch Tuesday another ETF focused on
master limited partnerships, this one targeting small-caps in the
The launch of the Global X Junior MLP ETF (NYSEArca:MLPJ) comes
roughly a week after the debut of the iPath S&P MLP ETN
Together, the new additions add new wrinkles to the quickly
crowding space of MLP-focused strategies that include the likes of
the $5.13 billion JPMorgan Alerian MLP ETN (NYSEArca:AMJ) and ALPS'
$4.45 billion Alerian MLP ETF (NYSEArca:AMLP). Global X itself
already offers a broad MLP fund, the Global X MLP ETF
(NYSEArca:MLPA), which has gathered $25 million since it came to
market in April.
MLPJ will track a Solactive index comprising
small-capitalization MLPs involved with everything from mining and
production of natural resources to storage, transportation and
marketing. The fund will cost 0.75 percent in annual fees.
MLPs are U.S. energy assets created back in the mid-1980s, and
have been used by many as safety investments, much like an
allocation to U.S. Treasurys, and one that is known to deliver
They are essentially partnerships that trade on a stock exchange
like a corporation, but without federal income tax liability at the
entity level, because they derive most of their revenues from
steady fees such as interest, dividends, real estate rents,
transportation and storage.
Because MLPs are well known for the steady dividends they
deliver, they have grown in popularity with investors who are
looking for income at a time of compressed yields in the more
traditional fixed-income space.
The company noted in its most recent filing that the fund would
be taxed as a regular corporation for federal income tax purposes,
and part of the fund's distributions would be treated as return of
capital for tax purposes.
That means distributions are not taxable income to the investor,
but they would reduce an investor's tax basis in the fund
As of Nov. 14, the index underlying the fund included 24
holdings with a market capitalization ranging anywhere from $200
million to $2.5 billion, although that range can change over time,
the filing said.
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