Alerian MLP Infrastructure Index
Before we discuss ways to invest in the American energy infrastructure MLP sector, let’s first analyze how the major benchmark for this sector, the Alerian MLP Infrastructure Index (AMZI), has been doing.
At this stage, let’s compare just the price returns of various indices to give us a broad idea of how the market perceives the AMZI compared to its energy peers like the Energy Select Sector SPDR ETF (XLE), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and the broader SPDR S&P 500 ETF Trust (SPY).
XLE represents the wider American energy industry with its largest holdings, including integrated energy companies like Exxon Mobil (XOM) at over 16%, and oilfield services major Schlumberger (SLB) at just under 8% of its holdings.
XOP is a more diversified ETF with many smaller companies, particularly those engaged in the business of oil and gas exploration and production.
SPY represents the broad American equity market, as well as the broad American economy in a way.
Over the last four years, SPY is clearly the more stable and better performer, a resounding endorsement of diversification, and the health of the American economy.
Over the last year or so, however, we can see XOP has done quite well, followed by XLE. This is because XOP’s constituents are heavily dependent on energy prices. This is true to a lesser extent in the case of XLE.
But, in the last couple of months, as crude prices accelerated downwards, while the most exposed XOP lost the most, AMZI seems to have stood its ground, coming second only to the broader SPY in terms of price returns at the end of our 4-year analysis window.
The next part of the series will explain the reason behind this performance.