Since early-to-mid 2010, MLP ETNs and ETFs have been gaining popularity. And even moreso in 2011. But while they are starting to come out of the woodwork, many investors still are a little fuzzy on the details of what they are and how they work. I’m here to help…
What is a Master Limited Partnership?
Known as MLP’s, master limited partnerships are simply just that…partnerships. For tax purposes, they are structured as partnerships instead of corporations, but still trade on the stock exchange. This partnership structure allows them to avoid paying federal or state income taxes.
The trend for MLPs is that they generally fall into the energy sector and are involved with the infrastructure of this industry. Also, they typically tend to be in North America, but both of these trends may change over time.
What are MLP ETNs and ETFs?
As of now there are more ETNs than ETFs for MLPs, but again, that is always subject to change. There also seems to be a low sensitivity or correlation to the market, but that isn’t always going to be the case. You may want to watch them in action for yourself and see if they are a good fit for your trading strategy…
