ETF Watch: Amplify Plans Oil-Hedged MLP Fund

Proposed ETF will invest in MLPs and take short positions in oil futures.
Reviewed by: Staff
Edited by: Staff

Amplify ETFs has filed for an actively managed ETF that will provide unique exposure to the MLP space. The Amplify YieldShares Oil Hedged MLP Fund operates under the premise that MLP equity prices are correlated over the long term with the price of WTI crude oil, and takes long positions in MLPs, while shorting oil futures contracts.

Although the fund will be actively managed, it will seek to outperform the Oil Hedged MLP Index from ETP Ventures. The fund will generally select its equity holdings from the index’s components. The index’s holdings are North American MLPs involved in various oil-related activities and business lines that have at least $1 billion in market capitalization and a three-month average daily traded value of $10 million or more. The 20 index components are selected based on 12-month dividend yield forecasts and equally weighted within the index.

The oil hedge is designed to reduce the correlation of the MLP portfolio to the price of oil and create a market-neutral effect. It involves a continuous short position that roughly equals 40% of the notional value of the MLP basket and a variable hedge that can range from 0 to 60% of the net notional value of the MLP holdings. The variable hedge relies on five formulas as part of the index’s proprietary algorithmic methodology. The formulas are designed for different market environments and allow for a diversified approach to the portfolio’s hedge, according to the prospectus.

The filing did not include a ticker or expense ratio, but it did indicate that the fund will list on the Bats exchange, which owns

There are no other oil-hedged ETFs currently trading in the U.S.

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