Global X, the New York-based ETF issuer known primarily for its lineup of equity-based commodities and emerging markets ETFs, will introduce its third master limited partnership, or MLP, ETF today with the debut of the Global X MLP & Energy Infrastructure ETF (NYSE: MLPX).
MLPs have soared in popularity with income investors in recent years. The asset class is known not only for robust dividends and high yields, but also for a series of tax advantages not found with common stocks. Those traits have spurred investors to pour billions of dollars into funds such as the JPMorgan Alerian MLP Index ETN (NYSE:AMJ) and the ALPS Alerian MLP ETF (NYSE:AMLP).
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While investors clearly like MLP ETFs, many are not aware until it is too late of a nasty surprise with some MLP funds. That is these ETFs are structured as C-corporations, meaning issuers can ding investors with high fees well in excess of the ETF's stated expense ratio.
MLPX will charge 0.45 percent per year and that is what investors should expect to pay because the most recent prospectus for the new ETF indicates the fund is registered under the Investment Company Act of 1940.
Fund companies can register MLP ETFs under the Investment Company Act as long as the ETFs are not 100 percent comprised of MLPs. MLPX will track the Solactive MLP & Energy Infrastructure Index, which is home to MLPs and traditionally structured firms.
Index holdings include Access Midstream Partners (NYSE:ACMP), EQT Corp. (NYSE:EQT), Enterprise Products Partners (NYSE:EPD) and Williams Cos. (NYSE:WMB). The strategy of an MLP ETF not entirely comprised of MLPs has worked. Just look at the First Trust North American Energy Infrastructure Fund (NYSE:EMLP). That fund is less than 14 months old and already has over $422 million in assets under management.
Global X's other MLP ETFs are the Global X MLP ETF (NYSE:MLPA) and the Global X Junior MLP ETF (NYSE:MLPJ), which debuted in January. Combined, the two ETFs have nearly $79 million in AUM.
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