MLPs Have Come a Long Way, Baby

Yield hunt, commodities demand bring more Master Limited Partnership funds, ETFs to market.


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In early March, Yorkville ETF Advisors rolled out its first ETF, which aims for the "high income" generated by commodity-based MLPs. Called the Yorkville High Income ETF (symbol: YMLP), it is a passively managed fund that tracks a Solactive index. The fund's 0.82 percent expense ratio is in line with the fees charged by other MLP ETFs. It holds 25 MLPs and has a distribution rate of about 8.75 percent.

Direct investments in MLP securities are also notorious for providing tax headaches. Payouts are considered distributions, not dividend or interest payments, and investors are required to file schedule K-1 returns for every state that the MLP derives profits from. Proponents say the extra time filing is worth the extra yield relative to other lower-risk investments.

Tax time has gotten a little easier, however. Both the ETF and exchange-trade notes (ETN) structures circumvent K-1 filings by providing investors with dividend and interest payments, which require only a single 1099 tax filing.