The Alerian MLP ETF
The Alerian MLP ETF (AMLP) gained 3.34% in the week ended August 28. The ETF tracks an index of 23 midstream MLP companies.
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 gained the least after the broad market SPDR S&P 500 ETF (SPY). SPY gained just 0.73% in the comparable group of securities we have discussed in this series. The biggest gainer in the week ending August 21 was the VanEck Vectors Oil Services ETF (OIH), which gained 9.55%. Read the previous part of this series to learn more about OIH’s performance.
Among AMLP’s holdings, the biggest gainers were Plains All American Pipeline Partners (PAA), Spectra Energy Partners (SEP), and Targa Resources Partners (NGLS), which gained ~9.87%, 9.14%, and 7.85%, respectively, in the week ended August 28. All these companies combined make up roughly 13% of AMLP.
AMLP holds midstream MLPs whose earnings are typically linked to their transported volumes of energy products. Plus, many of them enter into long-term fixed-fee contracts with their customers. This makes them more resilient to slumps in energy prices than their upstream and integrated peers.
Because investors typically buy MLPs for their regular income via distributions, MLP units are also affected by movements in 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 more detail.