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AMJ Gains 3.8%, Outperforms MLPI in Week Ended October 2

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AMJ gains 3.8%

The JPMorgan Alerian MLP Index ETN (AMJ) gained 3.8% in the week ended October 2. The Alerian MLP Index (AMZ) is AMJ’s underlying index. It rose 3.9% during the same week.

The index’s biggest gainers in the week were Rose Rock Midstream (RRMS), Shell Midstream Partners (SHLX), Plains All American Pipeline (PAA), and Valero Energy Partners (VLP). They rose 15.1%, 14.3%, 13.0%, and 12.6%, respectively, during the week. The four MLPs account for ~8.2% of AMJ.

AMZ heavyweights Enbridge Energy Partners (EEP), Enterprise Products Partners (EPD), Magellan Midstream Partners (MMP), and PAA all gained last week, driving the index up.

AMJ outperformed broad market ETFs last week. The broad market SPDR S&P 500 ETF (SPY) rose 1.1% during the week. AMJ also outperformed the Energy Select Sector SPDR ETF (XLE), which rose 2.4% during the week. AMJ traded at a yield of 5.4% at the end of the week.

The above graph compares AMJ’s returns for the week with AMZ, MLPI, and XLE. AMJ has a tracking fee of 0.85% per year, and its current market capitalization is $4.2 billion. We discussed MLPI in the last part of this series.

ETN investors are exposed to the issuer’s credit risk—in this case, JPMorgan Chase (JPM). We discussed the pros and cons of investing in ETNs in the previous part.

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AMZ 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). AMZI consists of ~23 energy infrastructure-focused MLPs.

The Alerian MLP ETF (AMLP) and the ETRACS Alerian MLP Infrastructure Index ETN (MLPI) track AMZI. As the above graph shows, MLPI returns were close to AMJ’s. AMJ tracks the broader AMZ index. AMZ has generated -33% returns over the last 12 months compared to 1.2% returns generated by the S&P 500 Index (SPX) during the same time frame.

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