ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Index Insights
  2. MLPs Are Not An Asset Class. Here’s what happened in April to prove it.
Index Insights
Share

MLPs Are Not An Asset Class. Here’s what happened in April to prove it.

Maria HalmoMay 25, 2015
2015-05-25

MLPs have traded basically sideways for the majority of 2015. Some months they’re down; some months they’re up. April was the best month so far. The Alerian MLP Index (AMZ), Alerian MLP Infrastructure Index (AMZI), and Alerian Energy Infrastructure Index (AMEI) gained 6.2%, 5.9%, and 5.5%, respectively.

This is the image alt text

What’s the difference between these indices? The AMZ tracks 50 energy MLPs across all subsectors, the AMZI tracks only energy infrastructure MLPs, and the AMEI tracks 30 energy infrastructure companies (C corporations and MLPs) across all structures. How is that reflected in the actual results? Here’s the dispersion of April performance for each constituent of these indices.


Content continues below advertisement

This is the image alt text

The AMZ has the largest dispersion (-25% to +29%), which you would expect given the large number of constituents and exposure to diverse energy subsectors such as upstream and marine transportation. The AMZI has the tightest dispersion (0% to +14%), as it is the most tightly focused index, composed of only midstream energy companies which utilize the MLP structure. The AMEI is between the two (-3% to +14%), which makes sense because it covers less of the energy value chain than the AMZ, but includes more geographical diversity and capital structure diversity than the AMZI. As companies get more creative (including the use of YieldCos as yet another structure, for example) the distinction between an asset class and a tax structure becomes much more relevant from a benchmarking perspective.

If we examine the new filings and IPOs, it’s obvious that the MLP structure is not being used exclusively by midstream names and should no longer be collapsed with them. On April 1st (no foolin’), CNX Coal Resources (proposed ticker: CNXC) filed its S-1. It is a coal MLP formed by CONSOL Energy (CNX) with longwall mines in Pennsylvania. Given that natural gas-fired electricity generation has been steadily displacing coal in the US, and the fact that CNXC’s coal is primarily sold for domestic electricity generation, CNXC expects to compete on the basis of low cost of production combined with lower transportation costs due to the location. It’s a vote of confidence for the structure given that there are only five coal MLPs currently trading (out of 123 energy MLPs) and only one, Alliance Resource Partners (ARLP), is an AMZ constituent.

GPM Petroleum (proposed ticker: GPMP) filed its S-1 on April 20th. GPMP will be a wholesale distributor of motor fuels to convenience stores controlled by its parent, GPM Investments. In case it seems like you’ve never heard of a convenience store called “GPM;” well, you probably haven’t. GPMP distributes Valero-branded fuel (more information here on convenience-store-related MLPs).

Enviva Partners (EVA) completed its IPO on April 28th, pricing 10 million units at $20. As a manufacturer of wood pellets for electricity generation (particularly popular in the UK), EVA is the first of its kind for the MLP structure. There have been timber MLPs before, notably Pope Resources (POPE), but EVA is the first wood pellet manufacturing MLP. Traditionally, companies involved in wood, paper, timber, or power generation are not eligible for the Alerian Index Series.

Black Stone Minerals (BSM) also completed its IPO this month, pricing 22.5 million units at $19. As an oil and gas mineral and royalty company, BSM owns the rights to the production and sale of the hydrocarbons under particular pieces of property. It leases these to E&P companies for an upfront cash payment, plus 20%-25% of production or revenue from production. Aside from identifying the existence of minerals or natural resources, this is about as close as it gets to the beginning of the energy value chain.

None of the four companies mentioned above are traditional MLPs. They focus on a wide variety of commodities and rarely operate midstream assets. However, each management team or sponsor has seen a value in utilizing the MLP structure. Similarly, StoneMor Partners (STON), an MLP which owns and operates cemeteries and funeral homes, compares itself to other MLPs and to the AMZ in its investor presentations.

This is the image alt text

This may be an accurate comp from a structural perspective, but most people would agree that refined products pipelines and cemeteries do not belong in the same asset class. So, if you are looking to find a peer of say, Magellan Midstream Partners (MMP), TransCanada (TRP and TCP) is a better choice than STON. Despite the fact that both MMP and STON are MLPs, the more accurate comparison would be with TRP. MMP and TRP may have different structures and operate in different countries, but they are both energy infrastructure companies.

At Alerian, we strive to provide the most useful and rigorous indices possible. For those looking to track energy companies using the MLP structure, the AMZ is an excellent choice. For those focused on energy infrastructure and midstream assets regardless of structure, the AMEI follows that space. And for those looking to track midstream energy MLPs, the AMZI has been incredibly popular. To see our full suite of available indices, please visit https://alerian.wpengine.com/indices/.

» Popular Pages

  • Tickers
  • Articles

Jan 27

ETF Issuer League: JPMorgan ETFs Almost $100 billion

Jan 27

Main Management Market Note: January 27, 2023

Jan 27

As Recession Signals Grow, Turn to Risk-Managed ETFs

Jan 27

HGER Acts as a Compelling Solution for Inflation

Jan 27

Mutual Fund-to-ETF Conversions: The Future in 4 Charts

Jan 27

American Century ETF Duo Hits Key Buy Signals Friday

Jan 27

ACES and AMLP Aid Investing in the Energy Transition

Jan 27

Target Long Duration, High Quality Fixed Income

Jan 27

The Sharpe-r Way to Invest

Jan 27

Structure Matters: Volatility May Make 60/40 Unclear

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

SMH

VanEck Semiconductor ETF

XLK

Technology Select Sector SPDR...

VTI

Vanguard Total Stock Market...

SOXX

iShares Semiconductor ETF

BLOK

Amplify Transformational Data...

META

Roundhill Ball Metaverse ETF

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X