Friday, June 22, 2012

Building a Better Midstream ETN/ETF: ALPS Alerian MLP ETF Vs JPMorgan Alerian MLP Index (AMJ; AMLP)

AMJ closed at $36.42, AMLN at $15.61.
Following up on yesterday's "JPMorgan Alerian MLP Index ETN: The Next TVIX? (AMJ)".
Remember, JPM has STOPPED issuing new AMJ notes.
From ETF Daily News;
After almost two years, ALPS Alerian MLP ETF (NYSEARCA:AMLP) gener­ates nearly the same daily trading value as JP Morgan Alerian MLP Index (NYSEARCA:AMJ), al­though the indexes used by the two products are different.

While the JPMorgan ETN had the leeway to include exploration and pro­duction MLPs in its MLP index, the ALPS ETF includes only midstream in­frastructure MLPs such as Energy Transfer Partners (NYSE:ETP), Enterprise Products Partners (NYSE:EPD) and Genesis Energy LP (NYSE:GEL).
Midstream master limited partnerships, the backbone of energy infrastructure in the US, offer a play on domestic energy with less volatility than exploration and production operations, which are exposed to fluc­tuating commodity prices.

Midstream MLPs are the toll takers of the energy industry; they get paid based on the volume of commodity product moved, rather than the price of the commodity produced. That makes for smoother revenue, while still providing exposure to energy produc­tion and demand and significantly re­ducing the ETF’s price volatility.
The MLP ETF also tracks a much more concentrated basket of MLPs, with just 25 index components versus the 50 components in the ETN’s basket. That more concentrated approach, coupled with the recent market sell-off, has boosted the yield on ALPS Alerian MLP ETF to just over 6 percent, about 2 percent higher than that currently offered by JPMorgan Alerian MLP Index....MORE