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Global X Debuts Small Cap MLP ETF – ETF News And Commentary
MLP ETF investing has surged in popularity in recent years as a
host of new products hit the space. Funds now exist that target
various subsets of the Master Limited Partnership world with ones
that zero in on high yield, natural gas, infrastructure, among
others.
However, there has been one corner of the MLP world that has
remained strangely overlooked despite the clear interest by
investors for the space; small caps. This looks to change now
though, as Global X has just released a Junior MLP ETF
(MLPJ) which looks to offer up first of its kind exposure
to pint-sized MLPs in exchange-traded fund form (read MLP ETFs:
Unfortunate Victims of the Fiscal Cliff).
This brand new ETF tracks the Solactive Junior MLP Index, giving
exposure to small cap MLPs. The product has 25 stocks in its
basket, and charges investors 75 basis points a year in fees for
its exposure.
In terms of the basket, exploration and production accounts for
just under 44%, trailed closely by energy transportation &
storage which makes up about 40% of assets. Top holdings are all
below 7% of assets, with Suburban Propane Partners
(SPH), Northern Tier Energy (NTI)and
Alliance Resources Partners (ARLP) rounding out
the top three and all accounting for at least 6.5% of the ETF
each.
Why Small Caps?
Small cap MLPs could be an interesting play at this time as they
could allow investors to still play solid trends in the space,
without purchasing some of the more bid up names in the large cap
domain. After all, these large caps have seen huge levels of
inflows in the past few years—thanks in part to ETF demand—so small
caps may be better positioned for the road ahead (read Three
Impressive Small Cap Dividend ETFs).
This particular ETF also looks to be more focused in on
exploration and processing, something that investors don’t really
see in large cap products. In these funds, like with MLPA and AMLP,
the focus is much more on the ‘toll-road’ business model which is
arguably less prone to volatility than what investors might see in
MLPJ.
MLPJ may also be an interesting play for those seeking a wave of
M&A activity in the space. As companies look to consolidate,
the move towards small caps in order to shore up supply lines or
explore for more hydrocarbons could become a very popular theme in
2013 in beyond (read Can You Beat These High Dividend ETFs?).
“We are pleased to offer the first and only ETF that provides
access to the rapidly growing junior MLP market,” said Bruno del
Ama, chief executive officer of Global X Funds, in a press release.
“MLPJ uniquely meets investor demand for both income and growth in
the energy space.”
Competition
The boom in the MLP market has definitely transferred over into
the ETF world as well, as many MLP products are extremely popular.
In fact, only four have less than $50 million in total assets,
while on the flipside, two have at least one billion in AUM and two
more have at least $300 million in assets.
Clearly, given the low level of competition in the small cap
space, Global X could find a way to establish a reasonable level of
assets in the market. It is worth pointing out though, that their
other MLP ETF, MLPA, is one of the few that doesn’t have a big
following, so it is by no means a sure thing (also read The Truth
about Low Volume ETFs).
Yet given the huge demand for MLP products and the potential for
small caps as acquisition targets, this could definitely change for
MLPJ, meaning that Global X could certainly have a winner on its
hands with its latest commodity focused ETF.
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ALERIAN-MLP (AMLP): ETF Research Reports
ALLIANCE RES (ARLP): Free Stock Analysis Report
GLBL-X MLP ETF (MLPA): ETF Research Reports
(MLPJ): ETF Research Reports
NORTHERN TIER (NTI): Free Stock Analysis Report
(SPPH): ETF Research Reports
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