Global X is set to add to its MLP exchange-traded fund stable with a natural gas ETF, as it looks to tap into a maturing sector.
The $9.4bn New York-based ETF issuer has updated an eight-year-old filing for the potential launch of the Global X MLP Natural Gas ETF with the fund’s expense ratio and portfolio managers.
The ETF would come to the market with 58 basis points expense ratio and be managed by the firm’s COO Chang Kim, portfolio manager James Ong, Nam To and Wayne Xie, according to the document. It does not reveal the ticker or specify a launch date.
The product would track an index comprised of MLPs engaged in the transportation, storage, processing, marketing, exploration and production of natural gas. The index is provided by Solactive AG which determines the relative weightings of the securities in the index and publishes information regarding the market value of the index
A Global X spokesperson declined to comment beyond the filing.
“There’s a lot of demand for yield in this low-and-flat interest rate environment,” Dave Nadig, managing director at ETF.com, told Fund Intelligence. “If yield’s your focus, there’s some logic here.”
Nadig said MLP ETFs are a crowded space, with strong yield options. “Most MLP ETFs have distribution yields north of 7% — that’s hard to get anywhere else,” he said.
Global X has three MLP ETFs, the $883m Global X MLP ETF (MLPA), its $770m MLP & Energy Infrastructure (MLPX) and the $17m YieldCo & Renewable Energy Income ETF (YLCO).
While MLPA has an 8.52% yield, MLPX and YLCO have 5.16% and 4.38% respectively, according to ETF.com.
“One of the reasons investors may elect to invest in MLP-based products is to obtain income through income distributions,” Chris Romano, quantitative portfolio risk manager at Orion Advisor Services, said.
“Given the natural gas growth in the United States has begun to mature, firms have reduced their CapEx spending which would enable them to payout more of their revenue in terms of income distribution” Romano added.
While YLCO has approximately $17m, it is the best performing product out of 67 Global X’s ETFs. It is rated five-star by Morningstar and ranks the 6th over the three-year period in the utilities peer group, the 97th percentile over the one-year period, and 10th year to date.
MLPX and MLPA are the second and third cheapest energy MLP ETFs with current 45 bps and 46bps expense ratios out of 26 peer products in the space, according to ETF.com, with MLPA set to fall by another 1bp.
MLPs ETFs has gathered total $19.57bn in total assets and the average expense ratio is 0.89%. While the space suffered from net outflows of $3.4bn due to market dislocation and tax reforms last year, it has recovered with a slight dip of $74m negative flows year to date.
MLPA ranks in the 51st percentile in the energy LP peer group over the one-year period, 87th over the three-year period and 62nd year to date, according to Morningstar data.
The fund has seen cumulative $914m inflows since it was launched in 2012. The positive flows peaked at $414m in 2017, according to Lipper data.
MLPX ranks in the 5th percentile in the energy LP category over the one-year period, 19th over the three-year period and 10th year to date. The ETF has seen $705m positive flows since it was launched in 2013 and took in $290m in 2018.
The largest ETF in the energy LP category is Alerian MLP ETF (AMLP) with $9.2bn AUM. The First Trust North American Energy Infrastructure Fund (EMLP) is the distant second with $2.4bn in total assets.
AMLP, priced at 85 bps, ranks in the 32nd percentile in the energy LP category over the one-year period, 76th over the three-year period and 70th year to date. EMLP, priced at 95 bps, ranks in the 3rd percentile in the energy LP group over the one-year period, 37th over the three-year period and 72nd year to date.
