AMZ fell 5.5% last week
The Alerian MLP Index (^AMZ), which includes 50 energy MLPs, was near its five-year low following turmoil in the week ending March 23, 2018. AMZ fell 5.5% last week and ended at 238.7. These levels were seen during February 2016 when crude oil traded near multiyear lows.
Last week, MLPs’ weakness despite strong gains in crude oil prices could be attributed to the general negative sentiment in US markets. There are fears about a possible trade war with China as well as the spillover effect from the FERC’s revised tax ruling. A few MLPs saw a downward target price revision from analysts due to the possible negative impact of the FERC ruling.
Out of the 92 MLPs, 81 ended in the red, one remained unchanged, and ten ended in the green. Among the top MLPs, Energy Transfer Partners (ETP), Enterprise Products Partners (EPD), Williams Partners (WPZ), and Plains All American Pipelines (PAA) fell 4.8%, 4.3%, 3.5%, and 0.3%, respectively. The Alerian MLP ETF (AMLP), which is comprised of 25 energy MLPs, fell 5.9%.
Performance in March
Overall, AMLP has lost 8.5% since the beginning of March. The Energy Select Sector SPDR ETF (XLE) has gained 1.8%, while the SPDR S&P 500 ETF (SPY) has fallen 5.0%. AMLP is underperforming XLE and SPY by 1,030 basis points and 350 basis points month-to-date.
MLPs’ relative underperformance relative to the energy sector and the broader markets despite strong crude oil prices and robust drilling activity could be attributed to the rise in the US Treasury yield and the FERC’s ruling on income tax policy. Most MLPs don’t see a material impact from the ruling, especially in the short term.
AMLP saw a net inflow of funds for the second consecutive week. AMLP’s fund inflows, despite the recent market turmoil, could be attributed to MLPs’ attractive valuations. AMLP saw a net inflow of $24.4 million funds. The J.P. Morgan Alerian MLP Index ETN (AMJ) saw a net outflow of $4.1 million. Overall, AMLP has seen a net outflow of $665.3 million since the beginning of 2018, while AMJ has seen a net outflow of $7.6 million.
Next, we’ll discuss the top MLP losses last week.