Global X Launches Junior MLP ETF

by on January 15, 2013 | ETFs Mentioned:

Global X, the firm behind the cheapest MLP ETF currently available to U.S. investors, announced today the launch of a fund targeting exclusively junior MLPs. The new Junior MLP ETF (MLPJ) will be linked to the Solactive Junior MLP Index, which includes about 25 companies that are engaged in the production, transportation and storage of energy commodities [see Energy Bull ETFdb Portfolio].

The specific breakdown of the industry within MLPJ will be as follows:

  • Exploration & Production: 44%
  • Energy Transportation / Storage: 39%
  • Refining / Distribution: 13%
  • Energy Equipment: 3%

Small vs. Large

MLPJ will be the first to target junior MLPs; all of the existing ETPs in the MLPs ETFdb Category focus on larger companies such as Kinder Morgan (KMP, with a market cap of about $32 billion) and Enterprise Products Partners (EPP, with a market cap of almost $50 billion). The largest components of MLPJ will be Suburban Propane Partners (SPH) and Northern Tier Energy (NTI), which have market capitalizations of about $2.4 billion and $2.3 billion, respectively [see 101 High Yielding ETFs For Every Dividend Investor].

MLPJ could be appealing to investors looking to tap into the MLP sector with higher upside potential; the possibility of M&A activity could make smaller companies more attractive. Of course, smaller companies often come with more higher risk and volatility.

Other MLP ETPs

MLPJ will be the thirteenth exchange-traded product in the MLPs ETFdb Category, which has more than $10 billion in aggregate assets. Other noteworthy funds in this space include:

  • JP Morgan Alerian MLP Index ETN (AMJ, A-): Largest ETN with more than $5 billion in assets.
  • Alerian MLP ETF (AMLP, B+): Largest ETF and most liquid ETP, with average daily volume of more than two million shares.
  • Global X MLP ETF (MLPA, A-): Cheapest MLP product, with an expense ratio of just 0.45% (category average is 0.81%).
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Disclosure: No positions at time of writing.