The J.P. Morgan Alerian MLP Index ETN (AMJ) rose 5.2% in the week ended August 28, 2015. The Alerian MLP Index (AMZ), AMJ’s underlying index, also rose 5.1% during the week. The index’s constituents, Plains All American Pipeline (PAA), Magellan Midstream (MMP), Buckeye Partners (BPL), and Energy Transfer Partners (ETP) rose 8.2%, 7.5%, 5.2%, and 5.0%, respectively, in that timeframe.
AMJ outperformed broad-market and energy-sector ETFs last week. 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. AMJ traded at a yield of 4.9% at the end of the week. The yield fell from 5.1% at the end of the previous week.
The above graph compares AMJ’s returns for the week with those of its underlying index (AMZ), MLPI, and XLE. AMJ has a tracking fee of 0.85% per year. Its current market capitalization is $4.2 billion.
ETNs are senior unsecured debt securities. ETNs provide investors an easy way to gain exposure to different market indices. ETN investors are exposed to the issuer’s credit risk—in this case, JPMorgan Chase’s (JPM).
The Alerian MLP Index
The Alerian MLP Index (AMZ) is a 50-member market cap–weighted index made up of energy MLPs. AMZ is broader than the Alerian MLP Infrastructure Index (AMZI), which consists of ~25 only energy infrastructure focused MLPs. The Alerian MLP ETF (AMLP) and the ETRACS Alerian MLP Infrastructure Index ETN (MLPI) track AMZI. AMZI, represented by MLPI in the graph above, marginally underperformed the broader AMZ Index last week.
AMZ’s top three components are Enterprise Products Partners (EPD), Energy Transfer Partners (ETP), and Magellan Midstream Partners (MMP), which form 16.4%, 10.8%, and 7.5%, respectively, of the index. Suburban Propane Partners (SPH), TC Pipelines (TCP), EnLink Midstream Partners (ENLK), and AmeriGas Partners (APU) are some of the index’s smaller components. Together, these four MLPs form ~5% of AMZ.