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 U.S. 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 U.S. 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 January 11, 2013, the index consisted of 25 MLPs and the three largest components of the index were Suburban Propane Partners LP (NYSE:SPH), Northern Tier Energy LP (NYSE:NTI), and Alliance Resource Partners LP (NASDAQ:ARLP).
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, chief executive officer 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.
ABOUT GLOBAL X FUNDS
Global X Funds is a New York-based provider of exchange-traded funds that facilitates access to investment opportunities across the global markets. With $1.58 billion in managed assets and over 100,000 investors from more than 100 countries as of January 10, 2013, Global X Funds currently offers exchange-traded funds that target Commodity Producers, International, Alternatives, Industry, Income, and Asset Allocation fund suites. For more information, please visit www.globalxfunds.com
Investing involves risk, including the possible loss of principal. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Investments in securities of MLPs involve risk that differ from investments in common stock including risks related to limited control and limited rights to vote on matters affecting the MLP. MLP common units and other equity securities can be affected by macro-economic and other factors affecting the stock market in general, expectations of interest rates, investor sentiment towards MLPs or the energy sector, changes in a particular issuer’s financial condition, or unfavorable or unanticipated poor performance of a particular issuer (in the case of MLPs, generally measured in terms of distributable cash flow). The fund invests in the energy industry, which entails significant risk and volatility. The fund is non-diversified which represents a heightened risk to investors. Furthermore, the fund invests in small capitalization companies, which pose greater risks than large companies.
Due to the nature of the Fund’s investments, the Fund will be subject to taxation on its taxable income. The NAV of Shares will also be reduced by the accrual of any deferred tax liabilities. The Underlying Index however is calculated without any deductions for taxes. As a result, the Fund’s after tax performance could differ significantly from the Underlying Index even if the pretax performance of the Fund and the performance of the Underlying Index are closely correlated.
The potential tax benefits from the Fund’s investment in MLPs depends largely on the MLPs being treated as partnerships for federal income tax purposes. As a partnership, an MLP has no federal income tax liability at the entity level. Therefore, treatment of one or more MLPs as a corporation for federal income tax purposes could affect the Fund’s ability to meet its investment objective and would reduce the amount of cash available to pay or distribute to you. There is no guarantee distributions will be made and dividends may be reduced or eliminated at any time. Furthermore, certain distributions are expected to be treated as a return of capital for tax purposes rather than from net profits and shareholders should not assume that the source of distributions is from the net profits of the fund.
This information is not intended to be individual or personalized investment or tax advice. Please consult a financial advisor or tax professional for more information regarding your tax situation. The information presented here is for informational purposes only. It was prepared on information and sources that we believe to be reliable, but we make no representations or guarantees as to the accuracy or the completeness of the information contained hereinCarefully consider the Funds’ investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Funds’ prospectus, which may be obtained by calling 1-888-GX-FUND-1 (1.888.493.8631), or by visiting www.globalxfunds.com. Read the prospectus carefully before investing.
Global X Management Company, LLC serves as an advisor to the Global X Funds. The Funds are distributed by SEI Investments Distribution Co., which is not affiliated with Global X Management Company or any of its affiliates.
Structured Solutions AG Indexes have been licensed for use by Global X Management Company, LLC. Global X Funds are not sponsored, endorsed, issued, sold, or promoted by Structured Solutions AG, nor does this company make any representations regarding the advisability of investing in the Global X Funds