Many investors are adding MLP ETFs to their portfolio, with popularity surging as investors look to hedge against inflation, rising rates, and capitalize on the sector’s recent solid performance.
The benefits of MLP investing are numerous; they include attractive yields, stable cash flows, exposure to real long-lived assets that generate inflation-protected cash flows, and have a low correlation to other income-oriented investments.
Looking at year-to-date inflows into the sector, the Alerian MLP ETF (AMLP ) has topped the charts, taking in $570 million in assets year to date.
AMLP, however, was poised to take the top spot based on its massive size relative to category peers. The fund giant has $6.5 billion in assets under management – nearly three times the assets of the next largest funds in the group, the J.P. Morgan Alerian MLP Index ETN (AMJ ) and the First Trust North American Energy Infrastructure Fund (EMLP ), each with $2.5 billion, according to ETF Database.
The average daily share volume over a three-month period highlights the fund’s popularity. AMLP’s average daily share volume is 3,562,983. To put that into perspective, AMJ is the second most-traded fund in the MLP space, with an average daily share volume of 874,897.
Average daily trading volume is an essential metric because many traders and investors prefer a higher average daily trading volume to a low trading volume because it is easier to get into and out of positions with high volume.
Stocks also tend to be less volatile when they have higher average daily trading volumes because much larger trades would have to be made to affect the price.
The energy sector has been on a hot streak, dramatically outperforming the broader market and delivering the highest returns out of all S&P 500 sectors for 2021 into the first quarter of 2022.
For more news, information, and strategy, visit the Energy Infrastructure Channel.
