ETF Series Solutions To Begin Trading The Zacks MLP ETF Tuesday, June 5, 2012
ETF Series Solutions has announced that they will begin trading The Zacks MLP ETF (NASDAQ:ZMLP) Tuesday, June 5, 2012. The Fund seeks to track the price and yield performance, before fees and expenses, of the Zacks MLP Index. The Index is comprised of approximately 25 stocks selected, based on investment and other criteria, from a universe of listed MLP securities listed on domestic exchanges. The MLPs in the universe are selected using a proprietary, quantitative rules-based methodology developed by Zacks. The Index constituent selection process utilizes a proprietary, quantitative, multi-factor selection methodology designed by Zacks to identify MLPs that offer the greatest potential from a risk/return perspective. The Index is adjusted quarterly, or as required, to assure timely stock selections.
Total Annual Fund Operating Expenses: 0.75%
Principal Investment Strategies
The Fund employs a “passive management” investment strategy to track the Zacks MLP Index (the “Index”). The Fund generally will use a replication strategy to track the performance of the Index and the correlation target sought by the Fund, meaning it will invest in all of the securities comprising the Index in proportion to the weightings in the Index. However, the Fund may utilize a sampling methodology under various circumstances where it may not be possible or practicable to purchase all of the securities in the Index. The Index is comprised of approximately 25-50 stocks selected, based on investment and other criteria, from a universe of master limited partnerships (“MLPs”) listed on domestic exchanges. The MLPs are selected using a proprietary, quantitative rules-based methodology developed by Zacks Investment Research, Inc. (“Zacks” or the “Index Provider”). The constituent selection methodology was developed by Zacks as an effective, quantitative approach to identifying those companies that offer the greatest yield potential.
The Index Provider utilizes multi-factor proprietary selection rules to identify MLPs that offer the greatest yield by assessing various factors, including yield, liquidity, relative value, and other factors. Each company is then sorted from highest to lowest.
MLPs considered for inclusion in the Index generally, at the time of selection, pay a dividend and are listed on at least one domestic stock exchange. Zacks further narrows the universe by ranking each potential constituent based on a variety of factors including yield, liquidity and relative value. The 25 highest ranking constituents are then chosen and are equally weighted so that each makes up 4% of the Index. The Index is rebalanced at least quarterly or as more often required to assure timely stock selections.
MLPs are publicly traded partnerships engaged in the transportation, storage, processing, refining, marketing, exploration, production, and mining of minerals and natural resources. By confining their operations to these specific activities, their interests, or units, are able to trade on public securities exchanges exactly like the shares of a corporation, without entity level taxation. Of the 25 partnerships eligible for inclusion in the Index, approximately 20 trade on the New York Stock Exchange (“NYSE”) and the rest trade on the NASDAQ. An MLP consists of a general partner and limited partners (or in the case of MLPs organized as limited liability companies, a managing member and members). The general partner or managing member typically controls the operations and management of the MLP and has an ownership stake in the MLP. The limited partners or members, through their ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in the operation and management of the entity and receive cash distributions. The Fund will be a limited partner (or a member) in the MLPs in which it invests. The MLPs themselves generally do not pay United States federal income taxes. Thus, unlike investors in corporate securities, direct MLP investors are generally not subject to double taxation (i.e., corporate level tax and tax on corporate dividends). To qualify as an MLP and to not be taxed as a corporation, a partnership must receive at least 90% of its income from qualifying sources as set forth in Section 7704(d) of the Internal Revenue Code (the “Code”). These qualifying sources include natural resource-based activities such as the processing, transportation and storage of mineral or natural resources.
The Fund is managed by Index Management Solutions, LLC (the “Sub-Adviser”) under the supervision of Exchange Traded Concepts, LLC (the “Adviser”). Under normal circumstances, at least 90% of the Fund’s total assets (exclusive of collateral held from securities lending) will be invested in the component securities of the Index. The Fund may invest the remainder of its assets in cash and cash equivalents, such as repurchase agreements or money market instruments, or other instruments the Sub-Adviser believes will help the Fund track the Index.
For the complete prospectus click: HERE