Solactive, a Frankfurt-based provider of financial market indices, has introduced the Solactive US Energy Infrastructure MLP Index, an index tracking the performance of master limited partnerships (MLPs) operating in the US energy infrastructure space.

Henning Kahre, Head of the Equity Team, Solactive.

The index has been licensed to ETF Securities for the launch of an exchange-traded fund listed on the London Stock Exchange and Deutsche Börse. The ETF will be only the second MLP ETF to be listed in Europe.

There are currently 22 ETFs in the US focused on MLPs with approximately $19 billion assets under management.

An MLP is an US company defined as a limited partnership publicly traded on an exchange. To qualify as an MLP, a partnership must generate 90% of its revenues or more from ‘qualifying’ sources — mostly related to the production, processing or transportation of oil, natural gas and coal.

MLPs are well-known to combine the tax benefits of a limited partnership (money is taxed at the unit holders’ level) with the liquidity of a publicly traded company.

The index has been specially designed to track infrastructure MLPs, as opposed to commodity MLPs. Historically, infrastructure MLPs have outperformed commodity MLPs on both an absolute and risk-adjusted basis due to their more stable toll-road business models.

The index universe is composed of securities structured as infrastructure MLPs listed on a regulated US stock exchange. To be eligible for inclusion in the index, a security must have a market capitalization of $500 million or above, an average daily traded value of $4 million or above and at least one distribution payout to unit holders at the time of both the current and previous selections.

The top 25 entities ranked according to their forward looking distribution yield and distribution stability are included in the index and weighted equally.

Henning Kahre, Head of the Equity Team, Solactive, said: “We already calculate several equity MLP indices and we also launched earlier this year the first index to offer exposure to MLPs via their bonds. There has clearly been a rising interest for MLPs over the past few years and we are enthusiast to support ETF Securities in providing access to this segment of the market to their European clients.”

The index is published in USD and is available in price return and total return versions. It is rebalanced twice a year, on the last business day of March and September.