Salient Plans MLP ETF As Its Debut

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November 16, 2011
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AMJJPMorgan Alerian MLP ETN
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Energy ETFs, MLP ETFs

Another money manager plans to enter ETFs, and with an MLP offering.

 

Salient Advisors, a Houston-based asset manager, is taking steps with U.S. regulators to gain permission to market exchange-traded funds, and plans for its first ETF to be focused on energy master limited partnerships.

In a filing it submitted to the Securities and Exchange Commission, Salient requested so-called exemptive relief from sections of the 1940s Investment Act to market actively managed ETFs and fund-of-funds ETFs.

The company detailed plans for its initial fund, the Salient MLP and Energy Infrastructure ETF, which would invest in master limited partnerships as well as in energy infrastructure companies.

The Salient fund would enter an already well-populated space of MLP ETFs sponsored by companies like Alerian and Van Eck. The biggest MLP-related exchange-traded product is the J.P. Morgan Alerian MLP ETN (NYSEArca: AMJ), which has more than $3.2 billion in assets.

MLPs pay hefty dividends, which makes them particularly attractive at times of low interest rates. Moreover, they are like toll booths, generating income from transporting commodities like gasoline as opposed to producing them, which insulates them from price volatility and makes their cash flow smooth.

The new fund would focus on names that deal primarily with energy logistics such as transporting, storing, gathering, processing, distributing or marketing of energy, the filing said. It would provide a “high level of total return” while making quarterly cash distributions.

No ticker or fees associated with the planned MLP ETF were disclosed in the initial filing.

Exemptive relief filings like the one Salient made are just the first step in the path to launching ETFs. It often takes at least six to 12 months from the date of the initial filing for a company’s first ETF to hit the market.

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