Credit Suisse’s MLPN ETN Underperformed the AMJ ETN Last Week




The Credit Suisse X-Links Cushing MLP Infrastructure ETN (MLPN) rose 4.6% in the week ended August 28. In comparison, the ETRACS Alerian MLP Infrastructure Index ETN (MLPI) rose 4.7% and the JPMorgan Alerian MLP Index ETN (AMJ) rose 5.2% over the same timeframe. The broad-market SPDR S&P 500 ETF Trust (SPY) rose 0.7% and the Energy Select Sector SPDR ETF (XLE) rose 3.5% during the week. MLPN traded at a yield of 5.9% at the end of last week.

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The Cushing 30 MLP Index

The MLPN ETN tracks the Cushing 30 MLP Index. The Cushing 30 MLP Index is an equal-weighted index focused on midstream MLPs. It uses a formulaic valuation methodology to rank MLPs for inclusion in the index. The methodology focuses on financial performance instead of market capitalization. The MLPs in the index are reset to an equal weight in the fund’s portfolio every quarter.

The index only tracks midstream MLPs. It doesn’t hold upstream and downstream MLPs. Upstream and downstream MLPs are generally considered more sensitive to commodity prices. The Cushing 30 MLP Index rose less than the Alerian MLP Index (AMZ) and the Alerian MLP Infrastructure Index (AMZI), which we discussed in the previous parts of this series. One of the contributing factors for the lower gain compared to AMJ may be the absence of upstream MLPs in the Cushing 30 MLP Index. Many upstream MLPs gained significantly last week with the rise in oil prices. The above graph compares MLPN’s returns for the week with those of its underlying index, MLPI, and AMJ.

Index components

Alliance Resource Partners (ARLP), Ferrellgas Partners (FGP), Western Gas Partners (WES), and EnLink Midstream Partners (ENLK) are some of the midstream MLP constituents of the Cushing 30 MLP index. Together, these four MLPs form ~13.3% of the index.

The top gainers among the index’s constituents in the week to August 28 included Plains All American Pipeline (PAA), Magellan Midstream (MMP), Buckeye Partners (BPL), and Energy Transfer Partners (ETP), which rose 8.2%, 7.5%, 5.2%, and 5.0%, respectively, during the week.


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