AMLP provides exposure to midstream energy infrastructure companies structured as master limited partnerships (MLPs), which operate pipelines, storage facilities, and processing plants. These firms generate steady cash flows from long-term contracts and pass most of it through to investors as tax-advantaged distributions.
How It Works
The fund tracks the Alerian MLP Infrastructure Index, holding the 25 largest energy infrastructure MLPs weighted by market cap with individual positions capped at 10%. It's structured as a C-corporation rather than a traditional ETF, which means it pays corporate taxes but allows regular brokerage accounts to avoid K-1 tax forms. Rebalances quarterly to maintain exposure to the largest pipeline operators.
Key Features
- 7.4% yield from MLP distributions without K-1 tax hassles
- C-corp structure simplifies taxes but creates tracking error due to embedded tax liability
- Pure-play exposure to toll-road-like energy infrastructure assets
Risks
- Energy sector correlation despite stable business models — can drop 30%+ when oil crashes
- C-corp structure creates 15-20% drag from corporate taxes, widening NAV discount in selloffs
- Distribution cuts possible if energy volumes decline — yield dropped from 8% to 4% in 2020
Who Should Own This
Income-focused investors who want energy infrastructure exposure without the tax complexity of owning MLPs directly. Works best as a 2-5% portfolio position for those comfortable with energy sector volatility in exchange for high current income. Not suitable for tax-deferred accounts where MLP tax advantages are wasted.