Eric Dutram: Exchange-Traded Concepts, the company providing ‘turnkey’ solutions to ETF providers, has already seen a great deal of interest from many firms seeking to tap into the impressive growth of the industry. One of the first to do this successfully has been Yorkville ETF Advisors, a firm specializing in bringing master limited partnership focused funds to market.
The company saw its first ETF, the Yorkville High Income MLP ETF (NYSEARCA:YMLP), debut last month, holdings 26 firms and tracking the Solactive High Income MLP Index. The product has seen decent inflows so far, having amassed roughly $20 million in assets in just over a month on the market (read ETC Debuts Yorkville MLP ETF).
While this might not sound like a lot, investors should remember that this is the company’s first fund in the ETF space and that volume has also been pretty good, coming in above 55,000 shares a day on average. Although expenses aren’t the cheapest or most expensive, the focus on high yield securities and the solid possible annual yield of nearly 8.7%, has likely made up for any perceived short comings that the fund may have.
In light of this relatively positive launch and the continued popularity of high income producing investments, it appears as though the company has filed for two more funds in the space targeting high yield securities in the MLP world (read Oil Bull Market Is No Place For MLP ETF Investors).
While some information was not released on the funds—such as expense ratios and top holdings—we have highlighted some of the key details from the SEC filing below:
Yorkville High Income Composite MLP ETF (NYSEARCA:YMLC)
This proposed fund looks to track, before fees and expenses, the price and yield performance of the Solactive High Income MLP Composite Index. This benchmark looks to act as a way to track select MLPs and royalty trusts that are structured as partnerships across a variety of market segments (read Two Energy ETFs Holding Their Ground).
In fact, the product looks to include MLPs that are engaged in any aspect of the business ranging from transportation and operation of storage terminals, natural gas production or storage, exploration of hydrocarbons, marine transportation of energy commodities, or direct mining or production of a variety of natural resources. With this approach, the fund looks to take a holistic look at the market and will be exposed to all segments of the MLP world.
Additionally, component securities must have a market cap of at least $400 million and see an average daily trading volume of at least $1 million in order to ensure ample liquidity. Also, the components must have paid out at least one distribution and meet certain requirements relating to current yield, coverage ratio, and distribution growth in order to guarantee that only the safest are included in YMLC.
Yorkville High Income Infrastructure MLP ETF (NYSEARCA:YMLI)
This fund, if approved, will track the Solactive High Income MLP infrastructure Index, before fees and expenses. This benchmark will focus in on MLPs that are engaged in the infrastructure segment of the MLP world which the company generally defines as the transportation of hydrocarbons.
In the MLP universe, this usually means one of the following; transportation or storage of refined petroleum products, some aspect of the natural gas supply chain, or transportation of crude oil or refined petroleum products. Also, much like the other proposed fund on the list, securities must pass fundamental screens for current yield, coverage ratio, and distribution growth in order to be included in the final product.
Furthermore, investors should note that this index has a minimum market capitalization requirement of at least $400 million while average daily trading volume must exceed $1 million over the past three month period. In total, the top 25 securities that meet these screens will be included in the fund while the minimum number of securities will not fall below 20 at any time.
MLP ETF Competition
While the focus on yield will undoubtedly help these proposed MLP ETFs gain assets if they are ever approved, one has to wonder how much more competition the MLP space can handle. There are already 11 other products in the space and more than $7.7 billion in assets are under management among the funds (see more on ETFs at the Zacks ETF Center).
Furthermore, there are already two other products with a high yield focus—three if you count the 2x note from E-TRACS (NYSEARCA:MLPL)—and these funds haven’t exactly been the most popular in the MLP world. Nevertheless, the specialized nature of YMLI and the broad focus of YMLC could offer up investors new ways to target the MLP markets. Should they be able to deliver in terms of high payouts, one has to believe that these products can also find a decent sized niche in terms of AUM in this increasingly popular, but crowded, space.
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