ETP Ventures, an index creator focused on solutions for the ETF industry, has launched its first index, the Oil Hedged MLP index (Ticker OILMLPTR), and licensed it to Amplify ETFs for the creation of a new Master Limited Partnership (MLP) Exchange Traded Fund (ETF).
The fund was listed on BATS Global Markets on 1 June, 2017.
The Oil Hedged MLP Index is a rules-based index seeking to provide exposure to the 20 highest-yielding MLPs that are involved in oil and gas services, while seeking to reduce crude oil correlation. The 20 index components are selected based on 12-month dividend yield forecasts and equally weighted within the index. To reduce crude oil correlation, the index tracks short positions in near-term crude oil futures contracts. The short oil position ranges from 40 per cent to 100 per cent of the value of the MLPs in the index based on proprietary correlation measures.
ETP Ventures was founded by energy industry veteran Michael Ellison and financial services entrepreneur Joseph McDonald, who recognised the problem of MLP value losses in periods of falling crude oil prices.
“The MLP investment product space, which currently accounts for $64 billion in assets and 75 products, saw their assets cut nearly in half by sharp declines in crude oil prices twice in the last eight years,” said Mr. McDonald. “The severe problem of high correlation between MLPs and crude oil has gone unanswered until now. Our solution seeks to eliminate the daily price relationship between oil and MLPs, thereby allowing pure exposure to the highly favourable dividend income and earnings growth of MLPs,” he adds.
Price and return data for OILMLPTR are independently calculated by Solactive AG, and published by ETP Ventures.