Global X Funds, the New York-based provider of exchange traded funds (ETFs), on Jan. 15 launched the Global X Junior MLP ETF (MLPJ). MLPJ is the first and only ETF to specifically target the often overlooked small-cap segment of the MLP market.
As the energy infrastructure in North America continues to expand, smaller capitalization MLPs often control increasingly important energy assets and are active in the exploration, transportation and storage of domestic energy resources. Because many of these companies are not included in major MLP indices, in many cases they have not experienced the same price growth as their larger counterparts and may offer value at current levels.
According to a 2012 report from the International Energy Association, the US will become the world’s largest oil producer by 2017 and a net exporter of natural gas by 2020. Junior MLPs are poised to benefit from the US energy renaissance, providing critical infrastructure for the exploration and production, transportation and storage of this increase in domestic energy and offering investors a means to access this growth. Despite a difficult IPO market, four energy-related MLPs have made their IPO debuts in 2012 alone, as the smaller-cap segment of the industry continues to expand.
The Global X Junior MLP ETF tracks exposure to the Solactive Junior MLP Index, which is designed to be a MLP benchmark index for small-cap energy and resource master limited partnerships. As of Jan. 11, the index consisted of 25 MLPs and the three largest components of the index were Suburban Propane Partners LP, Northern Tier Energy LP, and Alliance Resource Partners LP.
The fund pays quarterly income distributions. Tax features of MLPJ include 1099 tax reporting (no K-1s) and qualified dividends. Like all MLP ETFs, MLPJ is IRA and 401k eligible.
“We are pleased to offer the first and only ETF that provides access to the rapidly growing junior MLP market,” said Bruno del Ama, CEO of Global X Funds. “MLPJ uniquely meets investor demand for both income and growth in the energy space.”
MLPJ complements the Global X MLP ETF (MLPA), comprised of the 30 largest MLPs.