Published Fri, 20 Nov 2020 15:12:50 -0500 on Seeking Alpha
Seeking AlphaETF Analysis | Basic MaterialsALPS Alerian MLP ETF: Avoid Being Seduced By The High YieldNov. 20, 2020 3:12 PM ET|| About: ALPS Alerian MLP ETF (AMLP)by: Robert BoslegoRobert Boslego Boslego Risk ServicesModel oil and tanker portfolio and analysis from an oil expert.SummaryHigh yielding energy infrastructure fund AMLP has provided a negative total return over past 10 years vs. 271% for S&P 500.
AMLP is based on the Alerian Index which is mainly oil and gas pipelines.
The thesis used to be oil demand growth, now it is buybacks.
Oil demand has likely peaked in the U.S. and possibly globally, implying that pipeline supplies will become stranded assets.
The AMLP product is structurally flawed, according to an ETF expert.
Investors chasing high yields in the energy infrastructure Master Limited Partnerships ("MLP") segment have suffered greatly over the past ten years. The ALPS Alerian MLP ETF (AMLP) provided a total return of -34% as compared to +271% invested in the plain vanilla S&P 500. MLP's high yields turned out to be nothing but a mirage.
In this article, I will explain what the Alerian MLP Infrastructure Index (the "Index") is, what the ALPS Alerian MLP ETF (the "Fund") is, and why my outlook for the sector is for more of the same pain. Finally, I add the opinion of an ETF expert who views the Fund as structurally flawed and why.
Investors in AMLP, who have been seduced by the high yields, may want to reconsider this "high yield, low risk" investment (see Alerian MLP Index Is A Safe Harbor For Investors In The Face Of Global Economic Uncertainty, March 31, 2017. Change since publication, -61%).
The Alerian MLP Infrastructure Index (the "Index") is a composite of energy infrastructure Master Limited Partnerships (MLPs). According to Alerian:
The capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy... Read more