Etikett: master limited partnerships

Accessing the US Energy Revolution

ETF Securities Accessing the US Energy RevolutionAccessing the US Energy Revolution

Key points Accessing the US Energy Revolution

  • Master Limited Partnerships (MLPs) have delivered a growth in their quarterly distributions since 2014 at an average coverage ratio of 1.25 in their latest quarterly results in Mar 2016 allaying concerns of distributions cuts by MLPs. (Source: Bloomberg, Individual MLP websites)
  • The sustainability of the revenue stream of MLPs when compared to oil companies amidst the backdrop of volatile oil prices, highlights that MLPs would have offered a more resilient exposure to the energy sector.
  • On analysing Distribution Coverage and EV/EBITDA, we believe MLPs offer an attractive value proposition.
  • MLPs recent price performance is as a result of negative sentiment transpiring from equity markets and oil price volatility, evidenced by rising correlation 0.85 and 0.63 respectively. (Source: Bloomberg, ETF Securities) [correlation of monthly returns over 5 years]
  • TICKER: MLPI LN Accessing the US Energy Revolution

Valuation

  • 2016 expected distribution yield is 7.14% (Source: Bloomberg, ETF Securities)
  • The majority of MLPs in our index have a distribution coverage above 1 which supports the case for sufficient cash flows available to pay distributions.
  • Weighted average distribution paid in Q4 2015 have risen on average by 15% over the prior quarter despite the heightened concerns on the sustainability of distributions. In comparison the funds available for distribution have increased by 25% leaving a margin of 10% as a cushion for future distributions.
  • Historically we have witnessed MLPs increase debt levels during periods of favourable valuation. However in 2014, despite valuations EV/EBITDA reaching their peaks, MLPs have not raised debt as aggressively as done in the past rendering them in a stronger balance sheet position.

(Click to enlarge) Source: Bloomberg, ETF Securities, Company websites

(Click to enlarge) Source: Bloomberg, ETF Securities
(Based on current basket historical data to mitigate survivorship bias)

(Click to enlarge) Source: Bloomberg, ETF Securities
(Based on current basket historical data to mitigate survivorship bias)

Performance

  • Solactive continues to outperform its peers due to midstream focus and equal weighting methodology
  • Solactive has outperformed crude oil over the past 5 years
  • MLPs offer an inflation hedge due their long-term contracts which are regulated by the Federal Energy Regulatory Commission (FERC) and adjust to inflation annually (PPI), as well as distributions which adjust upwards according to changes in the CPI

(Click to enlarge) Source: ETF Securities, Bloomberg. The Solactive US Energy Infrastructure MLP Index is based on simulated data from 25 January 2011 to 4 March 2014 and actual data from 5 March 2014 to 31 March 2016.

(Click to enlarge) Source: ETF Securities, Bloomberg. The Solactive US Energy Infrastructure MLP Index is based on simulated data from 25 January 2011 to 4 March 2014 and actual data from 5 March 2014 to 31 March 2016.

(Click to enlarge) Source: ETF Securities, Bloomberg. The Yorkville MLP Infrastructure Universe Index TR is based on simulated data from 31 December 1996 to 15 February 2012 and actual data from 16 February 2012 to 31 March 2016.

Index recomposition March 2016

•         Following the index recomposition, the representation of General Partner (GPs) has increased from 7% to 17%.
•         Possible reasons:
o   Undervaluation – GPs had the largest 6-month drawdown (June 15 – Jan 16) which has meant a higher expected future distribution yield.
o   Alignment of interests – Owning GPs better align investors with management as most GPs own a stake (usually 2%) in their underlying LPs.
o   Incentive distribution rights (IDRs) – GPs hold IDRs which entitle them to an increasing share of the total distribution released by the LP to its unitholders (in spite of a mere 2% ownership). As LPs increase their distribution to unitholders, the GP’s distribution increases proportionally much faster, in accordance with a pre-set IDR schedule. At the highest tier of the IDR schedule, a GP – through its IDR ownership – may be receiving up to 50% of equivalent cash distributions made to LP unitholders. This is known as IDR leverage. Thus IDRs have the power to significantly enhance the cash distribution profile of GPs.  (IDRs  are explained below)
•         BAML Equity Research data shows that GPs have underperformed LPs on a total return basis but outperformed LPs on a cash distribution growth basis.

(Click to enlarge) Source: BAML Equity Research

(Click to enlarge) Source: Bloomberg, ETF Securities
(as at 17 April 2016)

Takeaways

  • The average distribution coverage across the index is 1.25 which is comfortably above 1 and reflects sufficient cash flow to meet cash distributions
  • The expected 2016 distribution yield is 7.14% backed by healthy fundamentals and oil price-resilient revenues (i.e. good cash flow)
  • MLPs offer a good inflation hedge with distributions often outpacing the Consumer Price Index (CPI) and pipeline contracts that adjust for inflation annually (Producer Price Index = PPI)
  • Funds for distribution are trading at a 10% premium to distributions paid so we may expect IDRs to gain value and give momentum to GP price performance

Important information

This communication has been provided by ETF Securities (UK) Limited (“ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the “FCA”).

This communication is only targeted at qualified or professional investors.

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

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This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.

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Varför höga utdelningar inte är riskfritt

Varför höga utdelningar inte är riskfritt

Varför höga utdelningar inte är riskfritt Höga utdelningar har länge varit något som har lockat investerare som söker en stabil direktavkastning, men i ett investeringslandskap där vi sannolikt snart kommer att få de högre räntor är det viktigt för utdelningsjagande investerare att vara försiktig med aktier och börshandlade fonder som levererat höga utdelningar historiskt. Här berättar vi varför höga utdelningar inte är riskfritt.

Många av de börshandlade fonder som levererat höga utdelningar har dessutom allokerat en stor del av sitt kapital till en känslig tillgångsklass som master limited partnerships (MLPs), men också till fastighetsinvestmentbolag (REIT) och utilities, något som har gjort att Global X SuperDividend U.S. ETF (NYSEArca: DIV) kunnat leverera en direktavkastning på över sju (7) procent de senaste tolv månaderna.

Denna ETF har ett lågvolatilitsfilter inbyggt för att på detta sät minska risken i portföljen. De underliggande innehaven måste ha ett beta som understiger 0,85 i förhållande till S&P 500 för att kunna få ingå i DIVs underliggande index.
Beta är ett mått på volatilitet, och aktier med en ett värde på 1,0 har en perfekt korrelation med aktiemarknaden i sin helhet, så ett beta på under 1 tyder på aktien är mindre volatil än marknaden.

oängen DIV exponering för MLPS och bolåne REITs är viktig. Kombinera dessa tillgångsslag med verktyg bestånden och vi pratar om en betydande del av DIV: s uppställning. Inteckning REITs är mycket känsliga för stigande ränterisker som eventuella ändringar i de korta räntorna kan ha en betydande inverkan på dessa REITs lönsamhet – inteckning REITs har gett attraktiv avkastning på grund av billig finansiering, men högre priser framöver skulle innebära ökade upplåningskostnader.

Notera att DIV har en tung exponering mot MLPs och bolåne-REITs. Kombinerat med att denna ETF har allokerat en betydande mängd kapital till utilities-sektorn. Bolåne-REITs är, precis som fastigheter, känsliga för stigande räntor eftersom förändringar i de korta räntorna kan ha en betydande inverkan på dessa REITs lönsamhet – inteckning REITs har gett attraktiv avkastning på grund av billig finansiering, men högre priser framöver skulle innebära ökade upplåningskostnader

Sensmoralen i historien här är ganska enkel. Högre avkastning brukar betyda högre risk. Som vi har sett i år, är det inte alltid som risktagande belönas, eftersom det har varit en ganska stor förskjutning av mer riskfyllda tillgångar till mer konservativa investeringar.

Den relativt höga exponering mot MLPs vid en tidpunkt när deras värde steg kraftigt hjälper inte det faktum att denna börshandlade fond har underpresterat nästan varje sektor som den har en exponering mot.

DIV köper aktier i femtio olika företag, de femtio företagen i USA vars aktierelaterade värdepapper listas på den amerikanska marknaden.Denna ETF har en driftskostnadsprocent som ligger på 0,45 procent, och delar varje månad ut sina mottagna utdelningar vilket har lockat investerare som söker regelbundna intäktsströmmar. För svenska investerare finns det ett problem med denna börshandlade fond, ett problem av skattemässig karaktär som berör MLPs, som betraktas som kommanditbolag av den svenska skattemyndigheten. MLPs är en speciell bolagskonstruktion som kan orsaka problem med Skatteverket. Typ 8 av 10 pipebolag har en sådan konstruktion så det gäller att se upp.

Proven Yield from Accessing US Energy Infrastructure

Proven Yield from Accessing US Energy Infrastructure

Despite ongoing oil price volatility, midstream MLPs have

Proven Yield from Accessing US Energy Infrastructure

Proven Yield from Accessing

US Energy Infrastructure

ETFS US Energy Infrastructure MLP

GO UCITS ETF

Factsheet  |  Brochure  |  Website

Despite ongoing oil price volatility, midstream master limited partnerships (MLPs) have surprised on the upside, increasing cash distributions by 2% in Q1 2015 and 15% YoY1.

Currently midstream MLPs offer about 5% annual yield2, an attractive rate in a world of near zero interest rates. The investment case for MLP Exchange Traded Products (ETPs) remains robust, with net inflows of US$1.7 billion so far in 20153.


MLPs have the potential to be a ’buy and hold’ solution for many investors. They deliver yield, distributed quarterly, and have shown resilience in the face of a volatile oil price, based on:

 

  • While crude oil is down 43% since peaking in June 2014, midstream MLPs are down just 6%4.
  • MLP capital expenditure growth in Q1 2015 has beaten research analysts’ estimates.
  • Merger and acquisition activity is expected to continue, potentially at an elevated pace, providing further stimulus for MLP share prices.

 

With the US continuing to pursue energy independence, we expect the shale oil revolution in the US to continue over the long term, whatever OPEC does in the near term.

 

Strong Distribution Growth Continues for Midstream MLPs

* Total quarterly distributions in US$ from the current underlying constituents in Solactive US Energy Infrastructure MLP Index over the last seven years, from April 2008 to March 2015. Source: ETF Securities.

ETFS US Energy Infrastructure MLP GO UCITS ETF
  • Midstream focus: First European listed ETF focused on ’the midstream’ MLP segment
  • Favourable tax treatment with no taxation at a corporate level. The fund itself is not subject to US dividend withholding and is therefore 100% exposed to the index performance
  • Transparent and robust ETF structure with intraday liquidity
  • Competitive pricing, with lowest TER among European MLP ETFs (as of 21 April 2015)

Download Brochure (.pdf)


ETFS US Energy Infrastructure MLP GO UCITS ETF is listed on LSE, Borsa Italiana, Deutsche Börse and SIX.

 

1. Measured by the Solactive US Energy Infrastructure MLP Index between 31 March 2014 – 31 March 2015

2. Measured by the difference of the Solactive US Energy Infrastructure MLP TR Index and Solactive US Energy Infrastructure MLP PR Index between 12 May 2014 – 12 May 2015

3. Source: ETF Securities calculation of global MLP ETPs flows during the period 1 January 2015 – 6 May 2015

4. Crude oil measured by front month WTI crude oil futures and midstream MLPs by the Solactive US Energy Infrastructure MLP Index between 20 June 2014 – 12 May 2015

 

For more information contact:

Peter Lidblom

ETF Securities (UK) Limited

T +44 (0) 207 448 8859

E peter.lidblom@etfsecurities.com

Important Information

This communication has been issued and approved for the purpose of section 21 of the Financial Services and Markets Act 2000 by ETF Securities (UK) Limited which is authorised and regulated by the United Kingdom Financial Conduct Authority.

Investments may go up or down in value and you may lose some or all of the amount invested.  Past performance is not necessarily a guide to future performance. The information contained in this communication is neither an offer for sale nor a solicitation of an offer to buy securities nor shall any securities be offered or sold to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of such jurisdiction. This communication should not be used as the basis for any investment decision. You should consult an independent investment adviser prior to making any investment in order to determine its suitability to your circumstances.

The financial instrument is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index and/or Index trade mark or the Index Price at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards the Issuer, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the financial instrument. Neither publication of the Index by Solactive AG nor the licensing of the Index or Index trade mark for the
purpose of use in connection with the financial instrument constitutes a recommendation by Solactive AG to invest capital in said financial instrument nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this financial instrument.

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Allt om Master Limited Partnerships (MLP:s)

Allt om Master Limited Partnerships (MLP:s)

Allt om Master Limited Partnerships (MLP:s). MLP är ett relativt okänt begrepp bland svenska privatinvesterare, utomlands är det desto mer etablerat. MLP står för Master Limited Partnerships och avser infrastruktursbolag som får en majoritet av sina intäkter genom transport, lagring och processande av olja och gas. Exempel på MLP-bolag kan t.ex. vara bolag som äger pipelines för transport av olja och naturgas. Kapitalinflödena till MLP ETF:er* och MLP ETN:er** har varit stora under de senaste åren och momentum har bara ökat. Det finns flera anledningar till att MLP:s är intressanta:

– Historiskt låg korrelation / samvariation med aktiemarknaden

– Relativt låg risk sett utifrån en treårig standardavvikelse

– MLP bolagen har en speciell bolagsstruktur som leder till en hög direktavkastning

– Rider på den nuvarande skifferolja och skiffergastrenden i USA. Ökad produktion betyder ökad transport av olja och gas

Det finns fördelar och nackdelar med att välja ETF-strukturen eller ETN-strukturen. Normalt sett är jag en stark anhängare av ETF:er men i detta fall finns det fall där ETN-strukturen, trots annorlunda risker som t.ex. kreditrisker mot utställaren, vinner över ETF-strukturen. För en bra genomgång kring detta, se bifogad länk från Indexuniverse – http://www.indexuniverse.com/sections/white-papers/16413-the-definitive-guide-to-mlp-etfs-and-etns. När det gäller MLP:s verkar den syntetiska ETF-replikeringsmetoden vara den absolut bästa. Det var därför med glädje som jag såg att den europeiska ETF-leverantören Source nyligen lanserade en syntetiskt replikerande MLP-ETF med två andelsklasser, en återinvesterande och en utdelande. Tyvärr noterades ETF:erna på Londonbörsen. En börs som få svenska privatinvesterare kommer åt i dagsläget. För ytterligare information om Source Morningstar US Energy Infrastructure MLP UCITS ETF, se länk nedan.

En viktig utvärderingsparameter som lyfts fram av Indexuniverse är index tracking eller tracking-error, dvs. hur väl instrumentet följer det underliggande indexet. I MLP-världen kan dessa skillnader vara STORA och inte lika relevanta (se bifogad artikel) som för normala ETF:er. Se nedan graf avseende utvecklingen under den senaste tolvmånadersperioden avseende den största ETF:en och den största ETN:en (båda följer Alerian MLP index (inte exakt samma)). Skillnaden mellan ETF:en och ETN:en uppgår till nästan 12 procent (130,67-118,84). Anledningen är delvis skatterelaterad samt att leverantören av den största ETN:en J.P. Morgan valt att inte emittera några nya andelar i ETN:en. Detta har lett till att ETN:en handlas till en premie relativt sitt faktiska värde (NAV) med över 2 procent. Premien har historiskt varit ännu större. ETF:en i sin tur påverkas negativt av kostnaden för uppskjutna skatter. I dagsläget uppgår resultateffekten till cirka 4 procent. Detta innebär att den faktiska totalkostnaden för AMLP ETF:en uppgår 4,85 procent per år. Trots detta har AMLP ETF:en vuxit om AMJ ETN:en i förvaltat kapital. Verkligheten är inte så enkel som den ser ut. Läs mer om detaljerna i Indexuniverse artikeln. allt om Master Limited Partnerships

ETP-tabell 1

[table id=657 /]

 

ETP-tabell 2

[table id=659 /]

 

Källa: Factset, 20 juni, all avkastning i SEK och inklusive utdelningar. 0 information saknas. Aktuell direktavkastning i procent. AuM avser förvaltat kapital och är i miljoner kronor. Korrelation avser 2 års korrelation jämfört med MSCI World

*ETF står för Exchange Traded Funds eller på svenska börshandlade fond

**ETN står för Exchange Traded Notes eller på svenska certifikat