AMLP [ALPS Alerian MLP ETF]

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skime
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AMLP [ALPS Alerian MLP ETF]

Post by skime » Wed Oct 09, 2019 2:08 pm

Does anyone here have any experience with this fund? It seems as if the MLP space has been in a depression for years. I was wondering if someone could shed some light on where they think this may be heading in the next 5 years.

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onthecusp
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Re: AMLP

Post by onthecusp » Wed Oct 09, 2019 3:18 pm

Never owned it but followed it for awhile. I work in the space and own some of the underlying MLPs. Yes it has been down or maybe sideways for a number of years, and recently down again. That is a market timing observation and market timing is not a good idea. I'll try to focus on the tax and asset allocation issues to the best of my knowledge, mostly from a few years of reading about AMLP in other forums.

Downsides, real or perceived, start out with the underlying securities primarily being in the oil and gas industry, more particularly in transportation, storage and, to a lesser extent, supporting exploration and production. Sentiment is negative partly on the idea that oil and gas won't be needed in the future, and partly on bad governance from some MLPs in the past that have evaporated gains and tax advantages for general unit holders to the profit of insiders, including parent corporations (who spun some MLPs off in the first place).

MLPs, being limited partnerships, come with a wide variance in the quality of corporate governance, much of it built into each individual entity by a variety of ownership structures. This is allowed partly because they don't follow the same rules that C Corps have to follow.
They come with complicated tax reporting requirements that are eliminated by holding them in AMLP which, I believe, acts like any other ETF from that point of view. It seems the "distributions" become "dividends" in the usual sense. I included this observation in "downsides" because the complicated tax reporting comes from deferred tax treatment (distributions are not normally taxable at the time) that has to be tracked and eventually paid (e.g. when you sell). In owning AMLP you lose the tax advantages when you lose the complications.

Upsides, also real or perceived, start with the perception by some that these are now "value" securities beaten down by the negative sentiment.
As value securities they are priced low by some measures including the current yield which is high (AMLP is over 8%) compared to say dividend paying stocks. AMLP, as a fund, spreads the risk of individual problems out, but you still have the sector concentration. Having been beaten down many MLPs cleaned up their act and balance sheets. There is a reason they are "value."

MLPs are not included in the S&P 500 index or Total Stock Market funds so billions of dollars in the economy is missing from many portfolios and a small allocation might fill that gap.

Back to market timing. You asked where it might be heading. I saw an interesting graph from the U.S. Energy Information Agency. Next to the last graph in:
https://www.eia.gov/todayinenergy/detail.php?id=41433
That shows renewable energy usage almost tripling (a factor of about 2.7) in the next 30 years. The same graph showed the use of oil and gas rising by a factor of about 1.3, so slower growth but growth is forecasted none the less.

I can't say that there is a compelling case for a risk adjusted investment here. But maybe as part of what ever portion of your portfolio you want to assign to the value end of your asset allocation I don't think it is a bad deal.

(Edited the factor for renewable growth estimated from the linked graph)

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LadyGeek
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Re: AMLP [ALPS Alerian MLP ETF]

Post by LadyGeek » Wed Oct 09, 2019 4:00 pm

I retitled the thread to help with the ticker symbol.

You might be interested in this article: AMLP Is Too Expensive - Avoid

Next, see the wiki: Master limited partnership
Master limited partnerships are intended for very experienced investors who understand both the risks involved and the incredibly complex taxation rules. Please ask in the Bogleheads forum for advice, as these securities are intended for high net worth individuals with the resources to manage these securities.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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skime
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Re: AMLP [ALPS Alerian MLP ETF]

Post by skime » Wed Oct 09, 2019 6:24 pm

Thank you. That helps.

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onthecusp
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Re: AMLP [ALPS Alerian MLP ETF]

Post by onthecusp » Wed Oct 09, 2019 6:36 pm

LadyGeek wrote:
Wed Oct 09, 2019 4:00 pm

You might be interested in this article: AMLP Is Too Expensive - Avoid

Next, see the wiki: Master limited partnership
Master limited partnerships are intended for very experienced investors who understand both the risks involved and the incredibly complex taxation rules. Please ask in the Bogleheads forum for advice, as these securities are intended for high net worth individuals with the resources to manage these securities.
Of course AMLP is an ETF of master limited partnerships which simplifies the taxation.

Agree that AMLP is crazy expensive with its 0.85% expense ratio.

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LadyGeek
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Re: AMLP [ALPS Alerian MLP ETF]

Post by LadyGeek » Wed Oct 09, 2019 7:46 pm

Yes, AMLP is an ETF.

I included the wiki reference to educate readers who may not be familiar with the concept. You can search the forum for members expressing frustrations about their tax returns. "Incredibly complex taxation rules" is not understated.

skime - If you're looking for an investment, may I suggest you post what you currently have in the Personal Investments forum using the Asking Portfolio Questions format? It will make you think about the "big picture" while giving us the information we need to point you in the right direction.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

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