Barclays iPath has announced the launch of the Barclays ETN+ Select MLP ETN (ATMP) on March 12, adding on to the growing family of master limited partnership fund products.
The new exchange traded note (ETN) tracks the volume weighted average price (VWAP) of Atlantic Trust Select MLP Index, which follows the midstream US and Canadian Master Limited Partnerships, limited liability companies and corporations that trade on major US exchanges in the GICS Energy Sector and the GICS Gas Utilities Industry, and meet certain criteria.
MLPs acquire, build and operate transportation-linked infrastructure assets. Though you might tend to link MLPs with the energy sector, particularly crude oil and natural gas, they are generally involved in transporting commodities. Hence, the performance of MLPs is weakly correlated commodity prices, but depends more on how much of the commodity is pushed through.
ATMP holds a basket of 20 to 100 MLPS and constituents in the underlying index are selected using the Atlantic Trust Select Master Limited Partnership Strategy developed by Stein Roe Investment Counsel. Fund components are rebalanced quarterly. The Atlantic Trust Select MLP Index has an average yield of 5.5 percent.
The selection criteria includes long-term credit ratings of MLPs, the portion of cash flows driven by mid-stream operations and their size as determined by average daily trading value and free-float market capitalization. It’s worth noting that ATMP can hold both limited partnership interests and general partnership interests.
Exposure to limited partnerships are capped at 8 percent each while general partnerships have an upper ceiling of four percent for each individual holding, which means assets would be well spread out.
The MLP space is fairly crowed with more than a dozen exchange-traded products of all varieties (ETFs, ETNs etc.), each offering a unique take on the sector. While it’s true ATMP will face some stiff competition, including Barclays own iPath S&P MLP (IMLP) launched in January, and the performance of the back-tested and simulated Atlantic Trust Select MLP Index has been better results than both the Alerian MLP Index and Alerian MLP Infrastructure Index.
You should also b e aware that ATMP is an exchange trade note. Unlike ETFs, ETNs are uncollateralized loans and exposes investors to default risks of the issuing bank.
ATMP has an annual expense ratio of 0.95 percent.
Disclosure: No holdings
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