An Energy Infrastructure ETF That Uses MLPs
Despite share price volatility, Paul MLPS continue to deliver compelling yield income.
The Arian MLP ETF, ticker AMLP, and the Alpsan Energy Infrastructure ETF, ticker ENFR, both target this area, but in different ways.
What's the latest with the MLP market? >> The energy infrastructure industry as a whole is very unique even within the energy sector.
This is a feebased business model where they make fees based on how much volume they transport, they store, they process, unlike most of energy which is either based on a spread between what you pull it out of the ground for and what you're able to sell it on for or in the servicing side of the business really dependent upon growing production.
And so it's very different from its risk return profile from other pockets of energy.
But it's also importantly a pocket of the market that has typically provided really strong relative yields.
And the difference between AMLP and ENFR is that AMLP, which is our f flagship product.
It's the largest most liquid MLP ETF on the market only owns master limited partnerships.
And in so doing, it's a somewhat limited view of the entire energy infrastructure industry.
It does orient towards crude oil activities than it does natural gas activities.
If you look at ENFR, it combines MLPS with CC corps.
And that means that you get much more comprehensive exposure to the overall energy infrastructure industry.
And the difference is going to be the relative yield of those two portfolios.
ENFR typically carries a lower yield around 200 basis points less than AMLP.
AMLP is a product people have come to for yield historically, but to play on the natural gas theme, meaning you're looking at the increasing demand for electricity and you're mapping that to perhaps increasing demand for natural gas both domestically and as we increase our capacity to export LNG to other markets around the world, those companies in ENFR tend to tilt a little more toward natural gas. 70% or so of the revenues in ENFR tied to natural gas activities, whereas it's closer to a 50/50 split in AMLP.
So, it's really about what your objectives are.
If you're trying to maximize yield, if you're trying to play on the longer term increase in electricity demand, that will be those will be important considerations for advisers and investors looking at AMLP versus ENFR.
But we think both of them are important portfolio diversifiers considering how small a slice energy is now of the S&P 500, 3% or so of the S&P 500 by weight, how small Midstream is even within the energy sector in the S&P 500, how little exposure so many investors have to the energy infrastructure space, but also how important a role these companies are likely to play in the electrification theme as well.
