With the fiscal cliff resolved, investors once again starting
buying high yielding products in droves. MLPs were no exception
to this trend, and have gotten off to a roaring start in
In fact, many MLP ETF products have easily outpaced the market
during the year-to-date period, and several have actually put up
double digit gains in the time frame. In this type of
environment, many ETF issuers have been quick to launch new funds
have both hit the market since the 1
However, it doesn't appear as if the trend is slowing down by
any means, as upstart provider Yorkville has now joined the 2013
ETF launch party with its own
High Income Infrastructure MLP ETF (
. This product is entering a crowded space and could face some
difficulty in accumulating assets, but a relatively unique
technique could assist the ETF in becoming more popular (see
MLP ETFS: Unfortunate Victims of the Fiscal
YMLI in focus
The new ETF looks to hold about 25 MLPs in its basket, while
utilizing an equal weighting methodology. This ensures that no
one MLP dominates the risk return profile of the fund and that
assets are well spread out across the space.
Overall, this results in a portfolio that is tilted towards
firms in the 'gathering and processing' (32%) aspect of the MLP
world, while natural gas pipelines (32%) also make up a big chunk
of the assets. Rounding out the portfolio is a 16% allocation to
refined product pipelines, 12% to crude oil pipelines, and then
8% to 'general partners'.
At time of writing,
DCP Midstream Partners (
Crosstex Energy (
Sunoco Logistics (
take the top three spots. Obviously with the equal weighting this
means that they do not account for that big of a chunk, combining
for about 9% of total assets (watch
MLP ETFs Surging to Start 2013
It should also be noted that due to the fund's structure as a
C-Corporation, a K-1 is not necessary for this ETF. This means
that 1099 reporting is fine, while
dividends will be qualified
How does it fit in a portfolio?
This ETF could be an interesting choice for investors seeking
broad exposure to the MLP space with a focus on income.
Additionally, the use of an equal weight strategy could help to
keep the portfolio balanced among the various subsectors, and
prevent a heavy concentration.
Investors should realize that the product is based on the
Solactive High Income Infrastructure MLP index, which was built
and designed to be investable. This is evident by the focus of
the benchmark on three key criteria; current yield, coverage
ratio, and distribution growth (see
Oil Bull Market Is No Place For MLP ETF
This could result in the product zeroing in on higher income
producing MLPs, on average, while it could also tilt it to those
that have increasing income payouts. The safety could also be
higher, thanks to the coverage ratio stipulation, so this could
make YMLI an interesting choice.
Still, the ETF is likely to face low trading volumes at least
to start, so bid ask spreads could be a bit wide. Additionally,
the fund is just middle of the road from an expense ratio
perspective at 82 basis points a year, so it is unlikely to
attract (or repel) investors based on this factor alone.
Can it succeed?
The MLP ETF space is extremely crowded and there are a wide
number of funds in the space. This will make it somewhat
difficult for YMLI to develop a big following without some solid
outperformance or a truly high yield.
In fact, two MLP products have more than $5 billion in AUM
-- so the space can be considered somewhat top heavy. Yorkville's
other fund though,
, has managed to buck the trend and see over $130 million in
Yorkville MLP ETF (YMLP) Debuts
This is a pretty respectable figure for a company that (at the
time) didn't have a single other fund to its name. Thanks to this
solid performance by YMLP, one has to imagine that YMLI could do
something similar in terms of popularity, especially if current
bullish trends in the broad MLP ETF space hold.
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JPM-ALERN MLP (AMJ): ETF Research Reports
ALERIAN-MLP (AMLP): ETF Research Reports
IPATH-SP MLP (IMLP): ETF Research Reports
GLBL-X JR MLP (MLPJ): ETF Research Reports
(YMLI): ETF Research Reports
YORKVL-HI MLP (YMLP): ETF Research Reports
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