MLP ETFs Battle for Inflows: AMLP vs. AMJ

by on May 21, 2013 | ETFs Mentioned:

Master limited partnerships (MLPs) have long been popular with investors looking for tax-advantaged income from investments, and MLPs’ introduction to the ETF space has been a huge success. Generally focused on natural resources, this relatively new sectors of ETFs has brought in a new style of investing, with funds seeing a huge influx of investments. With only 15 funds in this space, there is bound to be some fighting for investors, especially between the most popular funds: ALPS Alerian MLP ETF (AMLP, B+) and JP Morgan’s Alerian MLP Index ETN  (AMJ, A-) [Download How To Pick The Right ETF Every Time].

Meet the Competitors

MLP ETFAMLP and AMJ are far and away the largest players in the market,  holding $6.22 billion and $6.02 billion in total assets under management, respectively. For perspective, the third-largest fund is one-tenth the size of Alerian MLP ETF. Volume is likewise strong for the two largest instruments, and it’s no surprise that investors find the fund valuable. AMLP focuses primarily on the infrastructure component of the MLP asset class, while AMJ provides a more comprehensive benchmark for investors looking for energy MLP exposure. There is still some crossover between funds, as a majority of AMJ’s energy companies currently operate in the energy infrastructure industry, owning assets such as pipelines that transport crude oil, natural gas, and other refined oil products [also see How To Find The Best MLP ETF].

For investors interested in MLP exposure, there are potential advantages in both the ETF and ETN structures. ETNs like AMJ offer more favorable tax treatment and eliminate tracking error since they are debt securities. However, investors focusing on after-tax yield may opt for an MLP ETF like AMLP, as the treatment of distributions is generally more favorable for this product structure.

With AMLP launching just a year after AMJ in the summer of 2010, this fund has seen a huge influx of funding, and is quickly overlapping AMJ; however, JP Morgan’s AMJ continues  to outperform the ALPS MLP fund and is currently up an impressive 22% since January 2013 [try our Free ETF Head-To-Head Comparison Tool].

The Bottom Line

Given that so many MLPs are built around midstream, storage or energy transportation businesses, it’s not too surprising that the energy markets and local governments have a meaningful influence on funds like AMLP and AMJ. With the added bonus of MLPs generally using extensive debt financing, these units are also quite sensitive to interest rate moves and should be heavily investigated before investing. 

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Disclosure: No positions at time of writing.