UBS Launches Inverse MLP ETN


"Most inverse ETFs available to U.S. investors reset exposure daily."

UBS rolled out the latest addition to its rapidly expanding suite of MLP products on Wednesday, launching the E-TRACS 1x Monthly Short Alerian MLP Infrastructure Total Return ETN (MLPS). The new exchange traded note is designed to provide short exposure to the MLP Infrastructure market by tracking the inverse performance of the Alerian MLP Infrastructure Total Return Index, a benchmark that consists of approximately 25 MLP firms. As the name of the fund suggests, MLPS will reset exposure on a monthly basis; the majority of inverse ETFs available to U.S. investors reset exposure daily.

The index to which MLPS will be linked is already used by two existing MLP products, including the E-TRACS Alerian MLP Infrastructure ETN (MLPI) and the recently launched ALPS Alerian MLP ETF (AMLP). The new inverse ETN will be the fourth MLP product from UBS, joining MLPI, the Alerian Natural Gas MLP (MLPG) and 2x Monthly Leveraged Long Alerian MLP Infrastructure (MLPL).

The development of the ETF industry has resulted in a surge of interest in a corner of the domestic energy market that was often overlooked by investors. MLPs generally own and operate assets used in the transport of energy commodities throughout the U.S., such as oil and gas pipelines. The revenues of these entities depend on demand for oil and gas, which tends to exhibit less volatility than energy commodity prices. As such, and because they are treated as pass-through entities for tax purposes, MLPs in the energy infrastructure industry have, historically, delivered impressive distributions on a consistent basis. With interest rates hovering near record lows, and expected to remain there for the foreseeable future, investors have had to get creative in their hunt for current returns. For many, that search has led to MLPs, where yields can approach 7%.

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