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Morgan Stanley Launches ETN Tied to MLPs
March 21, 2011
SAN DIEGO (ETFguide.com) – Morgan Stanley (NYSE: MS) launched a new exchange-traded note (ETN) linked to master limited partnerships (MLPs).
The Morgan Stanley Cushing MLP High Income Index ETN (NYSEArca: MLPY) tracks the Cushing MLP High Income Index which contains 30 MLPs that hold energy infrastructure and related shipping assets in North America.
MLPs are partnerships that trade on public stock exchanges. Most MLPs own and operate assets in the energy sector as natural resource-based companies that own, build and maintain the energy infrastructure. They are structured as partnerships rather than taxable corporations, so they do not pay federal or state income taxes at the entity level. The business model of a typical MLP seeks the advantages of high barriers to entry, low price sensitivities and continued demand for energy-related products and services due to overall energy demand.
The MLPs inside MLPY are chosen for having the highest current indicative yields among an assortment of MLPs. The "current indicative yield" of a security is defined as the last quarterly distribution annualized divided by the current security price, with adjustment in some cases made for more current information.
Over the past five years, the Cushing MLP High Income Index has produced a return of 18.78% compared to a 2.37% for the Alerian MLP Index (NYSEArca: AMLP).* The S&P 500 (NYSEArca: SPY) gained 2.37% over that same period.
MLPY distributes quarterly coupon payments, less accrued tracking fees. The ETN is a senior, unsecured debt obligation of Morgan Stanley.
Holding MLPs inside an ETN vehicle subjects investors to credit risk but simplifies tax reporting. ETN investors receive a 1099 tax return instead of a K-1 form for tax income reporting.
MLPY’s annual fee is 0.85% and its maturity date is March 21, 2031.
Active Bond ETF from WisdomTree
The WisdomTree Asia Local Debt Fund (NYSEArca: ALD), which provides exposure to Asian debt denominated in local currencies minus Japan, was launched. The top countries represented inside ALD are Indonesia (11.16%), Malaysia (11.11%), South Korea (11.10%), Thailand (11.08%), Singapore (10.99%) and Australia (10.95%). The fund’s average weighted coupon is 4.24 years.
“We are excited to launch the Industry’s first Asia Local Debt ETF and believe the capital surpluses and strong growth and yield potential of the Asian economies make for an attractive fixed income offering,” said Bruce Lavine, WisdomTree President & COO.
ALD is actively managed and charges annual expenses of 0.55%.
Canadian ETF
The Global X S&P/TSX Venture 30 Canada ETF (NYSEArca: TSXV) was introduced for trading last week and targets companies on Canada’s junior exchange, the TSX Venture, for emerging companies. As of March 14, 2011, the three largest components of the index were Atac Resources, Canacol Energy and Rainy River Resources.
TSXV charges annual expenses of 0.75%.
*Data through March 1, 2011 |
