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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.

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