ETF Securities unveils US energy infrastructure MLP ETF

May 20th, 2014 | By | Category: Equities

ETF Securities, a London-headquartered provider of exchange-traded funds, has unveiled an ETF enabling investors to capitalise on the US energy boom.

ETF Securities unveils US energy infrastructure MLP ETF

ETF Securities has listed an ETF on the London Stock Exchange and Deutsche Börse providing exposure to US energy infrastructure MLPs.

Listed on the London Stock Exchange and Deutsche Börse (Xetra), the ETFS US Energy Infrastructure MLP GO UCITS ETF (MLPX) invests solely in master limited partnerships (MLPs) that are defined as infrastructure MLPs.

It is linked to the newly launched Solactive US Energy Infrastructure MLP Index TR, an index from index boutique Solactive which tracks the performance of 25 high-yielding infrastructure MLPs with market capitalisations over $500 million.

MLPs are usually considered to be those publicly traded partnerships that have active operations predominantly in the energy industry. They can be subdivided into two main groups: Commodity MLPs and Infrastructure MLPs

Infrastructure MLPs are crucial players in US energy infrastructure and derive the majority of their revenue from toll-based businesses. Activities typically relate to the owning and operating of assets used in energy logistics, including pipelines, storage facilities and other assets used in transporting, storing, gathering, and processing natural gas, natural gas liquids, crude oil and/or refined products.

Commodity MLPs, on the other hand, typically derive the majority of their revenue from activities relating to the exploitation, development, and acquisition of oil and natural gas producing properties. These MLPs typically produce oil and natural gas at the wellhead for sale to third parties. Commodity MLPs may also derive revenues from activities relating to the refining and marketing sectors of the energy industry, including the distribution of products to the end-user market for consumption.

Historically, infrastructure MLPs have outperformed commodity MLPs on both an absolute and risk-adjusted basis due to their more stable toll-road-like models. The returns of infrastructure MLPs are relatively uncorrelated to commodity-price movements or fluctuations in the economic cycle, as they do not take ownership of the commodity being moved.

Commenting on the launch, Matt Johnson, Head of Distribution EMEA at ETF Securities, said: “US energy infrastructure is a very high growth area, and with European listed exposures to the sector still limited, we believe that our MLP ETF offers new opportunities for those interested in gaining access to the returns generated by energy infrastructure in the US. We are offering the first European listed MLP ETF with pure exposure to Infrastructure MLPs. We believe that the growth of the industry, the favourable tax treatment of the underlying assets, and competitive pricing will appeal to European investors in the same way it has to investors in the US.”

The fund has a total expense ratio of 0.45%.

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