iPath, the exchange-traded note sponsor backed by Barclays Plc,
today launched an ETN focused on master limited partnerships, a
vibrant pocket of the investment world inhabited by yield-hungry
investors keen on finding ways to offset the fact that bond yields
are currently so low.
The iPath S&P MLP ETN (NYSEArca:IMLP) joins a field of huge
funds and mostly ETNs, including the $5 billion JPMorgan Alerian
MLP ETN (NYSEArca:AMJ) and the $4.6 billion Alerian MLP
(NYSEArca:AMLP). The new iPath ETN uses an MLP index from S&P,
which differs from the Alerian MLP index that underlies the new
ETN's two well-established rivals.
One small but noteworthy difference between iPath's IMLP and the
behemoths of the space is that IMLP has an annual cost of 0.80
percent, or $80 for each $10,000 invested, which is less than AMJ
and AMLP, which both have annual price tags of 0.85 percent.
Excluding leveraged and inverse products, IMLP's arrival means
the space now boasts 12 exchange-traded products, including eight
ETNs. That busy traffic for a relatively small piece of the
equities universe reflects the search for yield, which has become
exceedingly difficult since the market crashed in 2008, and the
Federal Reserve has devoted so much effort to keeping borrowing
The S&P MLP Index on which IMLP is based is designed to
provide exposure to leading partnerships that trade on major U.S.
exchanges and are classified in the GICS Energy Sector and GICS Gas
Utilities Industry, Barclays said today in a press release.
IMLP's benchmark includes both MLPs and publicly traded limited
liability companies, which have a similar legal structure to MLPs
and share the same tax benefits as MLPs, Barclays said.
"As investors continue to seek out investments with higher
yield, this ETN offers the potential for income along with upside
appreciation via index-linked exposure to US energy
infrastructure-focused partnerships," Kevin Murphy, head of U.S.
Equity and Funds Solutions at Barclays, said in the press
A Unique Opportunity For MLP ETNs?
IMLP's price tag matches the cost of the Etracs Alerian MLP
Index ETN (NYSEArca:AMU), an AMJ clone that came to market last
July in the wake of the halting of new AMJ note issuance by J.P.
Morgan that was causing the huge ETN to trade at a premium.
AMU has gathered $35.5 million, suggesting that perhaps IMLP
might have a decent chance at grabbing a piece of the MLP
take a bigger hit from the tax man than do MLP ETNs, which probably
explains why the space is more heavily populated by ETNs than
But then again, ETNs carry credit risk of the financial
institution that backs them. In the case of IMLP and other iPath
ETNs, that bank is London-based Barclays Plc.
Avoidance of that credit risk might go a long way to explain how
an exchange-traded fund such as the Alerian MLP ETF has raked in
upward of $5 billion in assets.
On the other hand, the cheapest exchange-traded MLP product on
the market, the Global X MLP ETF (NYSEArca:MLPA) has gathered just
$25 million since its launch last year, notwithstanding its almost
Vanguard-esque low annual expense ratio of 0.45 percent.
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