First Trust Advisors, a US-based ETF provider, has announced the launch of the First Trust North American Energy Infrastructure Fund (NYSE Arca: EMLP), an actively managed ETF designed to provide exposure to companies engaged in the North American energy infrastructure sector.
First Trust North American Energy Infrastructure ETF’s investment strategy will invest in publicly-traded master limited partnerships (MLPs), limited liability companies taxed as partnerships, MLP affiliates, Canadian income trusts and their successor companies, pipeline companies, utilities, and other companies that derive at least 50% of their revenues from operating or providing services in support of infrastructure assets such as pipelines, power transmission and petroleum and natural gas storage in the petroleum, natural gas and power generation industries.
First Trust believes that this is an opportune time to invest in energy infrastructure assets, in part because of the new technologies that have been developed to extract previously inaccessible natural gas and oil supplies trapped in shale deposits in North America.
Robert Carey, Chief Investment Officer of First Trust, said: “Higher margins for oil and gas drilling have made production companies more amenable to guaranteeing solid returns for long-term contracts to pipeline owners, thereby offering an incentive to add capacity necessary to move their oil and gas to market more quickly.”
The fund is betting that new infrastructure will be required to move natural gas and oil from regions expected to see production growth. Furthermore, increased spending in other areas of energy infrastructure, such as power transmission, should also support opportunities for dividend growth.
“We think this fund has some attractive attributes compared to other alternatives in the market, among which is its focus on non-cyclical and regulated assets that have more steady cash flows, the tax efficiency of an ETF structure that limits MLPs to less than 25% of the portfolio and the benefits that can derive from active management,” added Carey.
The fund is listed on the NYSE Arca and comes with a TER of 0.95%. As at launch date the fund has 50 holdings, the top five of which are Enbridge Energy, Kinder Morgan, TransCanada, Williams Companies and Dominion Resources.
Following is a list of existing MLP ETF/ETNs (all NYSE listed):
Global X MLP ETF (MLPA)
Alerian MLP ETF (AMLP)
Yorkville High Income MLP ETF (YMLP)
UBS ETRACS Alerian MLP Infrastructure ETN (MLPI)
UBS ETRACS Alerian Natural Gas MLP ETN (MLPG)
UBS ETRACS Wells Fargo MLP Index ETN (MLPW)
Credit Suisse MLP Index ETN (MLPN)
JPMorgan Alerian MLP Index ETN (AMJ)
For UK-based investors looking to gain exposure to developed market infrastructure assets, the following funds are worthy of further attention:
iShares FTSE/Macquarie Global Infrastructure 100 ETF (INFR)
The iShares FTSE/Macquarie Global Infrastructure 100 ETF tracks the Macquarie Global Infrastructure 100 Index. The index offers exposure to the 100 largest stocks from developed and advanced emerging countries of the Macquarie Global Infrastructure Index. The index is comprised solely of companies that are engaged in the management, ownership and/or operation of infrastructure and utility assets. London (LSE) listed. TER 0.65%.
DB X-trackers S&P Global Infrastructure ETF (XSGI)
The DB X-trackers S&P Global Infrastructure ETF tracks the S&P Global Infrastructure Index. This index provides exposure to 75 listed infrastructure companies from around the world across three distinct infrastructure clusters: Utilities, Transportation and Energy. The Energy cluster comprises the areas Oil & Gas Storage and Transportation, the Transportation cluster comprises the areas Airport Services, Highways & Railroads and Marine Ports & Services and the Utilities cluster comprises Electric, Gas and Water. London (LSE) listed. TER 0.60%.
(Europe-based investors should note that the above iShares ETF is registered for distribution across much of Europe, while the DB X-tracker ETF is cross-listed on numerous European exchanges)