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ETF Specialist

MLP ETFs and ETNs: High Income, But Beware of Fine Print

Exchange-traded products give investors broad access to this desirable asset class, but resulting structural complications require close examination.

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Note: This article was originally posted on Sept. 5, 2012. We're re-featuring it as part of Morningstar.com's Income & Dividends Week, Dec. 10-14.

There’s a lot to like about master limited partnerships: high yield, the possibility of capital appreciation, diversification benefits, and lower volatility than the S&P 500. Huge inflows to the space this year have indicated a high level of investor interest. However, MLPs are also an unusually complicated asset class with a bevy of investment options in the exchange-traded space. Making a good choice on whether to invest in MLPs through exchange-traded products (or at all) is dependent on a solid understanding of the asset class, its taxation, and the implications of each vehicle.

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Abby Woodham does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.