By Tom Lydon:
Exchange traded funds that follow master limited partnerships, or MLPs, have been a popular draw for investors looking for attractive yields and an alternative energy sector play. Nevertheless, MLP ETFs come with their own quirks.
The Alerian MLP ETF (AMLP), which comes with a 5.71% 12-month yield, has gained 14.4% year-to-date. AMLP has amassed $6.2 billion in assets under management, ranking it among the largest energy sector funds, behind the Energy Select Sector SPDR ETF (XLE) with $7.6 billion.
The JPMorgan Alerian MLP Index ETN (AMJ), which has a 4.50% 12-month yield and $5.9 billion in assets, is up 23.4% year-to-date.
Due to the way the MLP funds are constructed, there is a noticeable performance discrepancy. Ned Davis Research's Neil Lesson points out that since MLP ETFs are structured as C-Corporations, the ETFs incur a deferred tax liability out of the returns every day, reports Brendan Conway
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