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Midstream equities are represented by the Alerian MLP Index.
Midstream MLPs, as measured by the Alerian MLP Index (AMZ), ended May up 0.2% on price basis and up 1.7% after distributions are considered. The AMZ underperformed the S&P 500 Index’s 6.3% total return for the month. The best performing midstream subsector for May was the Diversified group, while the Propane subsector underperformed, on average.
For the year through May, the AMZ is up 0.7% on a price basis, resulting in a 4.4% total return. This compares to the S&P 500 Index’s 0.5% and 1.1% price and total returns, respectively. The Propane group has produced the best average total return year-to-date, while the Gathering and Processing subsector has lagged.
An investment cannot be made into an index. Past performance does not guarantee future results.
The Alerian MLP Index (AMZ) The Alerian MLP Index is the leading gauge of energy infrastructure Master Limited Partnerships (MLPs). The capped, float-adjusted, capitalization-weighted index, whose constituents earn the majority of their cash flow from midstream activities involving energy commodities, is disseminated real-time on a price-return basis (AMZ) and on a total-return basis (AMZX).
The opinions referenced above are those of the author. These comments should not be construed as recommendations but as an illustration of broader themes. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions; there can be no assurance that actual results will not differ materially from expectations. The opinions are based on current market conditions and are subject to change. They may differ from these of other Invesco investment professionals.
Most MLPs operate in the energy sector and are subject to the risks generally applicable to companies in that sector, including commodity pricing risk, supply and demand risk, depletion risk and exploration risk. MLPs are also subject to the risk that regulatory or legislative changes could eliminate the tax benefits enjoyed by MLPs, which could have a negative impact on the after-tax income available for distribution by the MLPs and/or the value of the portfolio’s investments. Although the characteristics of MLPs closely resemble a traditional limited partnership, a major difference is that MLPs may trade on a public exchange or in the over-the-counter market. Although this provides a certain amount of liquidity, MLP interests may be less liquid and subject to more abrupt or erratic price movements than conventional publicly traded securities. The risks of investing in an MLP are similar to those of investing in a partnership and include more flexible governance structures, which could result in less protection for investors than investments in a corporation. MLPs are generally considered interest-rate-sensitive investments. During periods of interest rate volatility, these investments may not provide attractive returns.
Energy infrastructure MLPs are subject to a variety of industry-specific risk factors that may adversely affect their business or operations, including those due to commodity production, volumes, commodity prices, weather conditions, terrorist attacks, etc. They are also subject to significant federal, state and local government regulation.
ETF Shares are not individually redeemable and owners of the Shares may acquire those Shares from the Fund and tender those Shares for redemption to the Fund in Creation Unit aggregations only, typically consisting of 10,000, 20,000, 25,000, 50,000, 80,000, 100,000 or 150,000 Shares.
Propane companies specialize in transporting and delivering propane to customers. Diversified companies operate assets that transport a variety and mixture of petroleum products. Gathering companies involve connecting oil and/or natural gas wells to major pipelines through a series of small pipelines. Processing is required for natural gas and involves the removal of potential contaminants and separation of NGLs so that the gas can meet purity standards for pipeline transmission.
