Amplify ETFs has unveiled the Amplify YieldShares Oil-Hedged MLP Income ETF (Bats: AMLX), an energy-based Master Limited Partnership (MLP) ETF which actively hedges its exposure to oil prices. AMLX is the fourth income-oriented ETF to launch on the Amplify YieldShares platform.
The Amplify YieldShares Oil-Hedged MLP Income ETF (Bats: AMLX) invests in energy MLPs while actively hedging its exposure to oil price declines.
Energy MLPs are defined as those owning energy infrastructure in the United States, including pipelines, natural gas, gasoline, oil, storage, terminals, and processing plants, though an MLP need not own all of these or be vertically-integrated.
AMLX invests in historically high-yielding oil & gas MLPs while hedging exposure to oil prices. The active oil price hedge seeks to reduce MLP price volatility and correlation to oil price declines.
The ETF may appeal to income hungry investors as MLPs typically pay out the majority of their operating cash to investors on a quarterly basis. They are able to achieve consistently high yields as they usually do not pay corporate income taxes.
To obtain the tax benefits of a pass through, MLPs must generate at least 90% or more of their income from qualifying sources such as from production, processing, storage, and transportation of depletable natural resources and minerals.
Furthermore, Amplify ETFs believe MLPs have the potential to grow their future distributions in line with increased energy demand and new energy infrastructure spending.
Investors in MLPs typically assume a secondary risk exposure related to oil prices in that oil price declines may erode the stock price returns of MLPs and perhaps the income potential of MLPs over the long term. To mitigate this risk, AMLX adopts a hedge against oil price declines when investing in MLPs to reduce portfolio volatility and correlation to oil prices.
“Recent history has shown that oil price declines can have a significant impact on MLP share prices,” said Christian Magoon, CEO of Amplify ETFs. “AMLX is an ETF designed to hedge the impact of oil on MLPs while seeking to provide income and professional management of the portfolio.”
The fund has 20 constituents of which the largest holdings are Energy Transfer Partners (9.0%), Summit Midstream Partners (5.0%), Williams Partners (4.9%), and Spectra Energy Partners (4.9%).
Its total expense ratio (TER) is 0.85%.
The Global X MLP ETF (NYSE: MLPA) last month surpassed $500 million in assets under management, coinciding with the fund’s five year anniversary since its launch. The fund provides similar exposure as AMLX although it does not hedge the risk of oil price declines. Its TER is 0.45%.