MLPI UBS AG ETRACS Linked to the Alerian MLP Infrastructure

A bit of a market slump has hit a variety of sectors lately. High flying names in growth sectors like biotechnology and technology have faced severe weakness in particular, leading many investors to shift money to more well-positioned industries.

Arguably one of the best looking segments right now is in the energy world. Many energy ETFs have managed to not only hold up well lately, but also outperform the S&P 500 from a trailing one month look. And while many investors might just focus on the big ETFs tracking the broad energy space, a closer inspection of Master Limited Partnerships (MLPs) might also be an interesting idea (see 3 MLP ETFs Riding Out Market Volatility).

MLPs

MLP ETFs could be solid picks thanks to their position as the toll-roads of the energy industry. MLPs often operate pipelines and other energy infrastructure assets that give them stable and predictable cash flows, as well as great dividends.

However, while they might offer up solid yields, tax treatment—which requires a K-1 at tax time—makes them less than ideal for many investors. Fortunately with the advent of ETNs and ETFs (ETFs hold MLPs in a C-corp structure), tax issues are minimized, allowing investors to access these dividends in a surging industry without many of the headaches (read Most ETFs Are Tax Smart, Is Yours?).

How to Play

There are a number of ways to play the MLP space, as a number of ETF and ETN issues have moved in to take a piece of the high investor demand. In particular though, two products investors should keep a close eye on are the JP Morgan Alerian MLP Index ETN (AMJ) and the UBS ETRACS Alerian MLP Infrastructure ETN (MLPI), both of which have solid yields and offer exposure to a basket of MLPs.

We have discussed these ETNs, as well as the broader MLP ETF space, in our short video below, make sure to watch!



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JPM-ALERN MLP (AMJ): ETF Research Reports
 
E-TRC UBS ALERN (MLPI): ETF Research Reports
 
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