Alerian MLP ETF
The Alerian MLP ETF (AMLP) lost 6.36% in the week ended August 7. The ETF tracks an index of 25 midstream MLP companies like Plains All American Pipeline Partners (PAA), MarkWest Energy Partners (MWE), and Magellan Midstream Partners (MMP). These three companies together account for 22.42% of AMLP.
MLPs are special companies that pay most of their earnings as distributions to unit holders. To understand MLPs better, check out our Primer on MLPs. AMLP is an easy way for investors to gain low-cost, diversified exposure to the midstream sector. Midstream companies help transport, process, and store energy.
AMLP lost the most among our comparable group of stock ETFs. The better performer among stock ETFs in the week ending August 7 was the VanEck Vectors Oil Services ETF (OIH), which lost just 1.67% in the same period. Read the previous parts of this series to learn more about OIH’s performance.
Among AMLP’s holdings, the biggest losers were MarkWest Energy Partners, Targa Resources Partners (NGLS), and Plains All American Pipeline Partners, which lost 18%, 15.7%, and 15.28%, respectively, in the week ended August 7. Combined, the drop was ~49%.
AMLP holds midstream MLP companies whose earnings are typically linked to volumes of energy products transported by them. Plus, many of them enter into long-term fixed-fee contracts with their customers. *This makes them relatively more resilient to slumps in energy prices compared to their compared to their upstream and integrated peers.
Because MLPs are typically bought for their regular income via distributions, MLP units are also impacted by movements in the interest rates. Check out our sector coverage on our Fixed Income ETFs page.
Usually, AMLP is among the safer bets for investors to play energy prices. Read What you need to know about investing in the Alerian MLP Index for additional details.