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Citi has joined the cohort of investment product providers tapping investor interest in the North America energy infrastructure space with the introduction of a new exchange-traded note providing exposure to a portfolio of 25 Master Limited Partnerships (MLPs).
The ETN is the second to be issued under the US investment bank’s C-Tracks brand.
Listed on the NYSE Arca, the C-Tracks Miller/Howard MLP Fundamental Index ETN (MLPC) is linked to the Miller/Howard MLP Fundamental Index.
This index systematically selects and weights a group of 25 MLPs with superior ratings for recent distribution growth, distribution coverage, and estimated future distribution growth, as implied by upcoming capital expense. The index has demonstrated superior absolute and risk-adjusted performance historically.
The index is the first index to emerge from the recently launched Miller/Howard Strategic Indexes, a majority-owned subsidiary of Miller/Howard Investments, a boutique asset management firm with $6.1 billion of assets under management.
Commenting on the launch of Miller/Howard Strategic Indexes last month, Lowell Miller, President of Miller/Howard, said: “We’ve been thinking about this for a long time. We’ve spent literally decades studying the factors that make for a successful investment as a way to improve our portfolio performance; it just makes sense to quantify those factors in a strict rules-based format for use as an investment-minded benchmark or as a strategic approach to a segment of the market.”
As Miller explains: “Traditional approaches to indexes assert that any index or benchmark should be capitalisation-weighted. As investors we’ve always had trouble with that. Bigger is not necessarily better. Often it’s worse because the opportunities for growth may be entirely in the past. Anyone who lived through the tech bubble knows that larger cap size is often just a function of investor over-enthusiasm and price speculation. We want indexes that say ‘Here’s how the stocks with the best set of fundamentals have been doing.’ Of course the essence of the fundamental approach involves thorough testing of the factors involved. It’s more of an investor’s mindset – the right factors at the right weights. There’s a lot more involved than just counting up the market values of a group of securities.”
The ETN has an annual fee of 0.95%.