An investor’s guide to MLPA and its holdings, like Magellan

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MLPA

The Global X MLP ETF (MLPA) tracks the Solactive MLP Composite Index. The index tracks the overall performance of the United States master limited partnerships (or MLP) asset class. The index comprises MLPs engaged in the transportation, storage, processing, refining, marketing, exploration, production, and mining of natural resources.

The Global X MLP ETF (MLPA) launched in April 2012. Major constituents of MLPA include Magellan Midstream Partners (MMP), Enterprise Products Partners L.P. (ETP), Kinder Morgan Energy Partners (KMP), Buckeye Partners (BPL), and Access Midstream Partners L.P. (ACMP).

The last quarterly distribution on the MLPA ETF was $0.22 per share, which on a current price of $16.32 per share (as of April 11, 2014) results in a current yield of ~5.5%.

The total return from holding the MLPA ETF was ~2.2% as of January 1, 2014. In the past year, the ETF has returned ~7.4%.

MLPA Holdings

As of April 11, 2014, total assets under management for MLPA were $83.7 million. On average, 34,536 MLPA ETF units traded in the exchange. Total annual operating expenses for the fund are 7.67%, consisting of a management fee of 0.45% and a deferred tax expense and franchise tax expenses of 7.22%.

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For federal income tax purposes, MLPA has been structured as a “C-Corp.” So MLPA accrues deferred tax liability for its future tax liability on the capital appreciation of its investments, and the distributions it receives on the equity securities of its constituent MLPs are considered returns of capital. The deferred income tax expense (or benefit) represents an estimate of MLPA’s potential tax expense (or benefit) if it were to recognize the unrealized gains (or losses) in the portfolio. All realized and unrealized gains (or losses) on investments and expenses may vary greatly from year to year and from day to day, depending on the nature of the fund’s investments, the performance of those investments, and general market conditions.

Investors receive a variable quarterly dividend linked to the cash distributions paid on the MLPs in the index, less accrued tracking fees. A portion of each quarterly distribution is treated as a return of capital for tax purposes, while the remaining portion is treated as a qualified dividend.

The largest MLP ETF fund is the Alerian MLP ETF (AMLP), which tracks the Alerian MLP Index, a capitalization-weighted composite of 50 energy MLPs. Other MLP ETFs include the Yorkville High Income MLP (YMLP), the Global X MLP ETF (MLPA), the Yorkville High Income Infrastructure MLP ETF (YMLI), and the Global X MLP & Infrastructure ETF (MLPX). Note that these other MLP ETFs all have significantly smaller market caps than AMLP.

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