UBS Launches Leveraged Ex-Energy MLP ETF (LMLP)

by on June 26, 2014 | ETFs Mentioned:

After debuting the ETRACS Wells Fargo MLP Ex-Energy ETN (FMLP) earlier this month, UBS rolled out a leveraged version of the same product. Yesterday marked the official launch of the ETRACS Monthly Pay 2xLeveraged Wells Fargo MLP Ex-Energy ETN (LMLP), which adds leverage to an already unique strategy [for more ETF news and analysis subscribe to our free ETF Daily Roundup].

FMLP and LMLP mark a turning point for the ETF world, as they are the first products to focus on MLPs while excluding the energy field. Typically, when investors think of MLPs, their minds go straight to energy, as a number of oil and gas companies utilize this structure, but there are a number of options beyond the energy world that employ the MLP style.

Dividends a Focal Point

New ETFsLike all MLP products, LMLP will come with an enticing dividend yield. Because the fund employs a 2X leverage, its index is able to yield in excess of 15%. High yields have been a big theme for issuers over the past few years, as investors have been craving a healthy income stream beyond ultra-low rates offered from the Fed. LMLP will certainly fall around the highest yielding funds in the space, which figures to give it a fair amount of attention out of the gate.

A word of caution, however, as the dividend yields on some of these products can blind investors to the risks involved. As a leveraged product, LMLP will be a relatively dangerous investment and is not meant for your average retail investor. Before making an allocation to the fund be sure that you fully understand how the ETN works and all of the risks involved with such an investment.

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Disclosure: No positions at time of writing.