Punchy yield lures investors to Yorkville High Income MLP ETF

Feb 6th, 2013 | By | Category: Equities

The Yorkville High Income MLP ETF (YMLP) has surpassed $100 million in assets under management, less than a year since it debuted on the NYSE Arca.

Punchy yield lures investors to Yorkville High Income MLP ETF (YMLP)

The Yorkville High Income MLP ETF has pulled in over $100m in assets since debuting on the NYSE Arca in March 2012.

In terms of assets gathered, this puts the fund in the top ten of newly launched US-listed exchange-traded funds in 2012.

The success of the fund is likely down to the fund’s punchy headline yield (30-day SEC yield as at year end was 8.33%), coupled with booming demand for the Master Limited Partnership (MLP) asset class in general and growing interest in US energy infrastructure plays.

The fund’s underlying index, the Solactive High Income MLP Index, is also likely to have appealed to investors, given its rules-based approach which identifies those MLPs least likely to cut their distributions and most likely to increase them.

Darren Schuringa, managing partner of Yorkville ETF Advisors, said: “Our success since launch shows us that investors want stable high income sources in the energy infrastructure space.”

He added: “MLPs offer equity income exposure to the North American energy development revival and we believe investors will be rewarded in strategies that offer true diversification within the asset class.”

Despite the strong inflows, however, the actual performance of the fund has been less impressive. Since inception on 13 March 2012 through to close of trading yesterday, the fund had declined 5.08%. This compares to a gain of 2.18% for the Alerian MLP ETF (AMLP), its more established MLP ETF rival.

Moreover, in terms of assets under management, the fund still lags far behind the Alerian ETF, which has accumulated over $5 billion in assets. That said, the Yorkville fund has accumulated approximately triple the amount of assets that the Global X MLP ETF (MLPA) has pulled in since it launched in April 2012.

Looking at MLPs, it’s easy to see why investors are attracted to the asset class.

First, MLP returns have exhibited low correlation with the overall stock market over past two decades, aiding portfolio diversification and risk reduction; second, MLPs operate under a highly efficient tax structure which allows them to avoid corporate taxation; and third, MLP-type assets typically command a regional monopoly and operate toll-based business models with inflation hedges built into their contracts.

One important consideration when accessing this asset class in exchange-traded format, however, is the vehicle of choice: ETF or exchange-traded note (ETN). The majority of assets invested in MLPs is in ETNs. While ETFs are typically favoured over ETNs for most traditional assets classes (equities, fixed income etc), ETNs can offer a number advantages when investing in MLPs.

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