AMLP: Understanding The Structure And Suitability Of This Income ETF

2025-05-14 11:00:00 ET

Summary

• The Alerian MLP ETF tracks the Alerian MLP Infrastructure Index, focusing on high-yielding midstream master limited partnerships, but suffers from a significant tracking error due to tax laws.
• The ETF's structure as a C-corporation introduces tax-related performance drag, causing it to underperform its benchmark index consistently.
• The ETF offers high yields, making it appealing for income-focused investors, but its high expense ratio and tracking error are notable drawbacks.
• For retirement accounts, an exchange-traded note like UBS ETRACS Alerian MLP Infrastructure Index ETN Series B may be a better option, despite default risk.
• This article discusses how this fund works and and its suitability for investment portfolios.

The Alerian MLP ETF ( AMLP ) is an exchange-traded index fund offered by SS&C ALPS Advisors that is designed to track the Alerian MLP Infrastructure Index . The Alerian MLP Infrastructure Index is a specialized index that tracks energy infrastructure companies that are structured as master limited partnerships. There are relatively few companies that fall into this category, and as such, the index only includes thirteen companies. This low number of constituent companies is a result of two crises that struck the energy industry during the decade following the 2009 Great Recession. The first of these crises was a 2014 collapse in oil prices. The second crisis was the COVID-19 pandemic, which also caused a temporary collapse in energy prices. During these two events, many master limited partnerships found themselves having difficulty obtaining capital and they ended up restricting their businesses as corporations, in the case of Kinder Morgan ( KMI ) and Targa Resources ( TRGP ), or merging with larger midstream companies, as was the case with Crestwood Equity Partners and Energy Transfer ( ET ) in 2023. These restructuring and acquisition activities have reduced the number of companies that are eligible for inclusion in the Alerian MLP Infrastructure Index over the years, and as mentioned, there are now only thirteen....

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