Global X Funds undercuts rivals with launch of low-cost MLP ETF (MLPA)

Apr 19th, 2012 | By | Category: Alternatives / Multi-Asset

Global X Funds, a New York-based ETF provider, has launched the Global X MLP ETF (MLPA), a fund providing comprehensive exposure to the MLP industry.

Global X Funds rolls out low-cost MLP ETF (MLPA)

New York-based ETF provider Global X Funds has launched the Global X MLP ETF (MLPA), designed to provide a high level of income while capitalising on increased energy demand.

North America’s energy supply is constantly being transported, stored and processed to meet growing demand.  Energy MLPs, or Master Limited Partnerships, are owners and operators of key pieces of infrastructure involved in this supply chain and, as a result, stand to benefit from continued energy use and additional investments in US energy infrastructure.

Historically, MLP returns have not been highly correlated with the broader market as represented by the S&P 500, offering investors the potential for portfolio diversification (Wells Fargo, 2010). Many energy MLPs operate a toll-road model for generating revenues, which generally creates a stable revenue stream, and has less direct correlation to commodity prices.

According to an article in Forbes, “Infrastructure MLPs are not only stable cash flowing investments with growing dividends, but they have the potential for capital appreciation as they are one of the best ways to capitalise on the future upside created by the meteoric growth in unconventional reserves”.

Aimed primarily at US investors, though available to international investors, potential tax features of the Global X MLP ETF include 1099 tax reporting (no K-1s), qualified dividends and, as per all ETFs, they are IRA and 401k eligible. The fund pays quarterly income distributions.

The Global X MLP ETF tracks the Solactive MLP Composite Index, which is designed to be an MLP benchmark index for energy and resource master limited partnerships. As of 17 April, 2012, the index consisted of 30 MLPs and the three largest components of the index were Energy Transfer Partners LP, Enterprise Products Partners, and Plains All American Pipeline LP.

The fund has been listed on the NYSE and comes with a Total Expense Ratio of 0.45% pa. This is significantly less than the industry average MLP ETF TER of 0.85%. Commenting, Bruno del Ama, chief executive officer of Global X Funds, said: “The Global X MLP ETF provides cost effective access to the MLP sector with a much lower fee than the industry average.”

Following is a list of existing MLP ETF/ETNs (all NYSE listed):

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)

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