Direxion has expanded its line-up of long-term buy-and-hold strategies with the launch of the Direxion Zacks MLP High Income Shares (ZMLP) exchange-traded fund.
The new ETF seeks to generate investment results based on the Zacks MLP Index’s price and yield performance.
Zacks Index Services compiles and manages the index, which is composed of approximately 25 master limited partnerships (MLPs) listed on North American stock exchanges. The index’s holdings are selected using a quantitative, rules-based methodology developed by Zacks to eliminate MLPs with insufficient share prices, market capitalisations and liquidity. All companies in the index are equally weighted so that each holding constitutes four per cent of the ETF’s portfolio, which is rebalanced on a quarterly basis.
“At a time when investors are increasingly turning to MLPs for attractive income, we are offering investors long-term and cost-efficient access to this asset class,” says Eric Falkeis, president of Direxion. “Zacks’ proprietary security selection process is the cornerstone of its reputation for reliable financial analysis, and its methodology for identifying the most stable and liquid MLPs can benefit investors in our new ETF.”
MLPs may provide investors with additional diversification because they have historically had a low correlation to stocks and bonds. Furthermore, ETFs that invest more than 25 per cent of their portfolios in MLPs are structured as C-Corporations, and therefore do not require investors to submit K-1 tax forms in states where MLPs in the portfolios operate.
“Income-oriented investors have found MLPs to be one of the few steady sources of healthy dividends during this low-yield economic environment,” says Mitch Zacks, senior portfolio manager, Zacks Investment Management. “We look forward to working with Direxion to provide a greater number of investors with exposure to MLPs we believe are among the best in their asset class.”