Morgan Stanley, the New York-based investment bank, jumped into the world of master limited partnership exchange-traded notes today with the launch of an MLP ETN focused on the energy transport sector.
The Morgan Stanley Cushing MLP High Income Index ETN (NYSEArca:MLPY) comes with an expense ratio of 0.85 percent, matching the costs on a slew of MLP ETNs and ETFs that have been rolled out by a number of financial institutions in the past year.
Many MLP products often shoot off dividends of more than 6 percent, making them quite attractive at a time official interest rates are near zero and U.S. stocks are gyrating with great volatility. Most focus on energy, making them like tollbooths for commodities such as gasoline. They collect fees for transporting the products and are largely immune to price swings in the commodities themselves.
MLPY complements a number of other MLP-related products rolled out in 2010 by a number of financial institutions and index providers. The other existing funds include the UBS E-TRACS 2x Monthly Leveraged Long Alerian MLP Infrastructure ETN (NYSEArca:MLPL) and the UBS E-TRACS Alerian Natural Gas MLP ETN (NYSEArca:MLPG) as well as the E-TRACS 1X Monthly Short Alerian MLP Infrastructure Total Return Index (NYSEArca:MLPS).
The granddaddy of them all, the JPMorgan Alerian MLP ETN (NYSEArca:AMJ), has gathered $2.45 billion in assets, making it a perfect example of the first-to-market advantages ETN issuers and ETF sponsors often enjoy.
A number of ETFs targeting the world of MLPs, including the Alerian MLP ETF (NYSEArca:AMLP) have come to market as well. AMLP, like Morgan Stanley's MLPY, costs 0.85 percent.
ETFs, unlike the ETNs, come with no credit risk. The value of an ETN is based solely on the good faith and credit of the issuing bank, whereas ETF owners hold a share in the underlying assets of the fund.
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