The MLP ETF space can add one more to its list, as the 12th fund made its debut on Friday. The iPath S&P MLP ETN (IMLP) hit the market and looks to compete with some of the biggest names in the space. The MLP sector has been one of the most talked about in recent years as paltry yields around the fixed income sector have led to investors finding their dividends in different places [for more MLP news and analysis subscribe to our free newsletter].
The fund tracks an index that provides exposure to leading partnerships that trade on major U.S. exchanges and are classified in the GICS Energy Sector and GICS Gas Utilities Industry. The index includes MLPs as well as firms that have a similar legal structure to MLPs but still share the tax benefits of these high-yielding firms.
Top holdings include a number of familiar faces like Kinder Morgan (KMP), Enterprise Product Partners (EPD) and ONEOK (OKS), among others. The fund also uses the ETN structure that comes with no tracking error as well as benefits come tax season. All in all, IMLP is very similar to a number of other, more popular products in the space, though it looks competitive based on cost [see also MLPs: CEFs, ETPs or Mutual Funds?].
IMLP charges 80 basis points for investment, tied for the cheapest ETN in the space. UBS launched their own MLP ETN (AMU) back in July of 2012 that also charges 80 basis points; that fund has over $35 million in assets and trades more than 73,000 shares each day. If AMU is any guide, IMLP may be on its way to success, but its lack of differentiation from the competition may be a problem. IMLP almost mirrors the top ten holdings of AMU and has little else to set itself apart from a fund that has already done well to gather assets.
Currently, there are a few funds that stand out from the rest in this space. As far as size and liquidity is concerned, AMJ and AMLP crush the competition, as these are easily the most popular products in the space. When costs are factored in, Global X’s MLPA ETF charges just 45 basis points, a full 35 less than its next nearest competitor. Finally, when it comes to yield, MLPY currently tops the space with a handsome 7.3% yield for all of its shareholders. The popularity of the MLP space is certainly encouraging for this new fund, but IMLP will certainly have its work cut out if it wants to secure a place in the investing world.
Disclosure: Long AMJ.