Source has launched the Source Morningstar US Energy Infrastructure MLP UCITS ETF, which seeks to track the Morningstar MLP Composite Index (TR).
The ETF provides exposure to US energy infrastructure via master limited partnerships (MLPs) and is the first in Europe to offer diversified exposure to this compelling segment of the US energy market.
The US energy landscape is undergoing a profound structural shift. Domestic energy production has seen extraordinary growth since 2005, as technological advances have allowed the extraction of oil and natural gas from previously inaccessible reserves. Infrastructure is central to this transformation: rising energy production is driving a significant expansion of energy infrastructure, across the US. MLPs are key players in this build-out. They own and operate many of the US’s core infrastructure assets, including pipelines, storage facilities, gathering systems and processing facilities. Although structured as partnerships, MLPs are listed and traded on US exchanges like conventional shares.
Historically, MLPs have generated stable cash flows, with relatively low sensitivity to commodity prices, and have typically paid out a high percentage of cash flows to investors. As such, they can offer an interesting opportunity to investors.
The Source Morningstar US Energy Infrastructure MLP UCITS ETF offers diversified exposure to MLPs via the Morningstar MLP Composite IndexSM (TR), a transparent, rules-based index. Launched in 2010, the index targets 97 per cent of the MLP universe, by market capitalisation, and currently comprises 39 constituents.
“US energy infrastructure has become a major investment theme, but, for European investors, investment opportunities are limited,” says Source chief executive Ted Hood. “This product offers a convenient and well-thought-out package: diversified exposure from a highly-regarded index provider and a robust, transparent ETF structure.”
The Source Morningstar US Energy Infrastructure MLP UCITS ETF is listed on the London Stock Exchange. It has a management fee of 0.50 per cent per annum and is available in reinvesting and distributing share classes.
“We are pleased that Source ETF has licensed our index for a MLP ETF,” says Sanjay Arya, senior vice president of Morningstar Indexes. “While MLPs as an asset class are just beginning to mature, investments in MLP ETFs and mutual funds have doubled in the last year as investor interest in income-producing investments and diversification has increased. We designed the Morningstar MLP Composite Index to provide broad exposure to the US MLP market with a weighting scheme that balances company size with dividend yield.”
