JPMorgan Launches New MLP ETF

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 |  Includes: AMJ, BBEP, EROC, KMP, SPP
by: Avi Morris

Alerian Capital Management announced that JPMorgan Chase & Co. (NYSE:JPM) launched an Exchange Traded Note based on Master Limited Partnerships in the Alerian MLP Index. The ticker symbol is AMJ . AMJ has a limited track record, just over one month, which tracked the spectacular rise of the Alerian MLP Index in April. More information on the fund is available here.

This ETF tracks a portfolio of MLPs aimed at emulating the Alerian MLP Index. But it has advantages others don't because MLPs are master limited partnerships. Partnership ownership is measured in units, not shares. Their quarterly payments are called distributions, not dividends. Distributions are typically 80-90% tax free (which really means tax deferred bringing tax hassle). Some accountants handle the hassle better then others, although ordinary computer tax packages are supposed to do the tax work very well. MLPs send K-1 tax packages around March 15, but they are trying to speed up distribution of the statements.

However, an ETF is a corporation which issues shares. Taxable dividends are reported on 1099s, unless they are paid as stock dividends in which case there is no need for tax statements. As stocks, they are also IRA (retirement account) friendly.

The ETF gives an averaging effect of many MLPs. Those who want to invest in MLP growth but are afraid because of tax issues from distributions, may want to take a look at this ETF.

Disclosure: I have no position in AMJ