Global X Funds, the New York based provider of exchange traded funds (ETFs), has launched the Global X MLP ETF (MLPA). MLPA provides a comprehensive benchmark of the MLP industry, while maintaining a low fee of 0.45% versus the industry average of 0.85%.
North America’s energy supply is constantly being transported, stored and processed to meet growing demand. Energy MLPs are owners and operators of key pieces of infrastructure involved in this supply chain, and as a result may 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 Forbes.com, "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" (Forbes.com, 2011). Potential tax features of the Global X MLP ETF include 1099 tax reporting (no K-1s), qualified dividends, and as are all ETFs, they are IRA and 401k eligible. The fund pays quarterly income distributions.
The Global X MLP ETF offers exposure to the Solactive MLP Composite Index, which is designed to be a 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 Global X MLP ETF provides cost effective access to the MLP sector with a much lower fee than the industry average," says Bruno del Ama (pictured), chief executive officer of Global X Funds.