Infrastructure Capital Advisors has launched the InfraCap MLP ETF (AMZA), the first actively-managed ETF offering pure MLP exposure.
AMZA consists of midstream energy master limited partnerships (MLPs) and related general partners and expects to establish an initial annualised distribution yield of 8.0 per cent.
The fund seeks to achieve capital appreciation, a high level of current income and steady growth in the income stream.
AMZA is structured to appeal to those who want to invest in the US energy infrastructure industry and benefit from the ongoing oil and gas drilling renaissance. The fund invests in midstream MLPs that are principally involved in the gathering, processing, transportation, and storage of crude oil, natural gas, natural gas liquids, and refined products. These volume based, ‘toll-road’ businesses typically generate and distribute substantial cash flow to their owners and represent a largely commodity insensitive investment in the domestic energy revolution.
The fund manager, Jay D Hatfield, was a co-founder and general partner of a NYSE-listed MLP, a hedge fund manager focused on the energy and utility sectors. He was also a Morgan Stanley utility and energy infrastructure investment banker.
The fund is designed to leverage the benefits of active management and proprietary internal research. Weightings are based on estimated total return and company fundamentals instead of market capitalisation.
Tax features of the InfraCap MLP ETF include 1099 tax reporting (no K-1s), qualified dividends, and quarterly distributions. The fund may be appropriate for IRA, 401k, and foreign investors.
“We are pleased to introduce this innovative product in what we believe to be the early innings of the US energy infrastructure boom and to provide our investors with the benefit of active management and potentially superior returns,” says Hatfield. “We believe that investing in companies with tangible assets that produce free cash flow creates stable, intrinsic value and is likely to produce reliable income to investors over time.”
