The Bearlinx Alerian MLP Select Index Exchange Traded Note

The Bearlinx Alerian MLP Select Index Exchange Traded Note (ticker BSR) was launched in July. We wrote about the Alerian MLP Index in our December 2006 issue, and concluded that since natural/geologic processes (e.g., oil and gas field depletion) were a key component of many MLPs, it could provide attractive diversification benefits to a portfolio.

We also noted the caveat that the overall amount of MLPs outstanding was quite small in comparison to the major asset classes, and the cost of access might therefore be prohibitive.

The new ETN has an expense ratio of only .85%, which makes it attractive.

On the negative side, the issuer is Bear Stearns, which, as evidenced by its recent bailout of two of its subprime mortgage focused hedge funds, presents an investor with a non-trivial amount of credit risk.

Bottom line: nice product, questionable issuer.