Someone's Gobbling Up MLP ETFs

Over the past 90 days, 20 (or 80 percent) of the 25 worst performing exchange-traded products are ETFs or exchange-traded notes (ETNs) related to oil and natural gas. And of those 20 offenders, including the worst performer, nine of those products are dedicated master limited partnership ETFs or ETNs.

The theory that MLPs are not intimately correlated to oil prices has been dealt a severe blow. Of the 25 worst performing non-leveraged ETFs and ETNs over the past 12 months, 11 are MLP funds. Things have gotten so bad for the space that one issuer said last month that it will shutter two leveraged MLP ETNs, one with over $100 million in assets under management.

Related Link: An MLP ETF Lottery Ticket

And all the Alerian MLP AMLP, the largest MLP ETF, has done this year is tumble more than 30 percent to send its trailing 12-month dividend yield north of 11 percent. That, after AMLP slid 25.7 percent last year.

Clearly, the environment for MLPs and the corresponding ETFs and ETNs remains tricky to say the least, but there are also signs of investors waxing contrarian with the asset class.

“After record net outflows in MLP's in November/December 2015, UBS Retail has turned net buyers in 2016, with February on pace for the largest month of net inflows in MLP's we have ever recorded,” said Rareview Macro founder Neil Azous in a note out Wednesday, citing data from Rob Chechillo of UBS Electronic Trading.

New MLP ETNs

So what is UBS doing in response to clients' renewed affinity for MLPs? Less than a month after redeeming two MLP ETNs, the issuer introduced two new, double-leveraged MLP ETNs on Tuesday, the UBS AG ETRACS 2xMonthly Leveraged Alerian MLP Infrastructure Index ETN Series B due February (NYSE: MLPQ) and the UBS AG ETRACS ETRACS 2xMonthly Leveraged S&P MLP Index ETN Series B due February 12, 2046 (NYSE: MLPZ).

Looking Ahead

At the end of last year, there were more than 25 MLP ETFs on the market with roughly $25 billion in combined assets under management.

Last month, independent ETF issuer REX Shares revealed it signed an agreement with United States Commodity Funds LLC to launch a series of innovative MLP ETFs, indicating more new MLP ETF supply could be coming to market this year.