Investors Are Nibbling At This Energy ETF

The energy sector has been an impressive redemption story this year. After ranking as the S&P 500's worst-performing sector last year, energy is on a roll this year, with the S&P 500 Energy Index up 15.69 percent.

Some overlooked energy exchange traded funds are delivering better returns than their traditional counterparts.

What Happened

Among the outperforming energy ETFs: the American Energy Independence ETF USAI. USAI, which debuted in December 2017, is not the run-of-the-mill, equity-based energy ETF.

Rather than focusing on integrated oil companies or exploration and production firms, USAI is heavily allocated to energy infrastructure companies.

“USAI provides exposure to the support systems that sit between the wellhead and the customer, which are critical to harnessing these important resources,” according to the issuer. “The American Energy Independence ETF provides exposure to the infrastructure that moves these growing energy supplies to market.”

Why It's Important

Home to $23.2 million in assets under management, USAI is a small energy ETF, but data suggest investors are starting to embrace this unique energy fund. Year-to-date, USAI has seen inflows of $13.56 million. Importantly, nearly $11 million of that total has flowed into the fund just this month, meaning USAI has almost doubled in size since the start of March.

The ETF follows the American Energy Independence Index, which includes U.S. and Canadian master limited partnerships and general partners.

“Growing production of crude oil, natural gas and natural gas liquids is increasing the need for new infrastructure to move, process and store this output,” according to USAI's issuer.

Thanks in large part to the boom in the Permian Basin in New Mexico and West Texas, U.S. oil output is near all-time highs and the country is now one of the world's largest oil producers.

What's Next

With its focus on energy infrastructure names, USAI could lure income investors, as MLPs and related entities typically feature significantly higher dividend yields than basic energy stocks. USAI's dividend yield of 4.78 percent is 160 basis points higher than the comparable yield on the Energy Select Sector Index.

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