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Who Stole My Alpha - Part 2

Mar. 09, 2018 11:53 PM ETInfraCap MLP ETF (AMZA)JMF, UNIT261 Comments


  • InfraCap MLP fund performance review.
  • No alpha, but keeping up with the benchmark.
  • Where we stand on it.

The virtually never-ending downslide in the InfraCap MLP ETF (NYSEARCA:AMZA) has investors questioning the validity of investing in it once more. We had previously examined the performance of this fund and concluded that it did an adequate job of keeping up with its levered benchmark, but the option return was being neutralized by lost upside during rallies.

Is that still true today or has something gone wrong and is the fund performing worse than before?


AMZA Total Return Price data by YCharts

Over the last one year, AMZA has produced a total return of -15.7% compared to the benchmark of the Alerian MLP Index total return of -14.6%. Running this over every time period and adjusting for the fact that AMZA uses a leverage of up to 30% shows how much "alpha" or excess returns, adjusted for leverage, AMZA produces.

Source: YCharts, Author's calculations

There are a few messages from that table. First that over every time frame, going back to AMZA's inception in October 2014, the Alerian MLP total return has been negative. That makes life difficult for any manager. Bear markets are notorious for punishing the slightest bad news and rarely rewarding good news. The second is that AMZA has produced pretty much in line with what a levered 130% benchmark would produce with minimalistic alpha over any time frame.

There is good and bad news in that second point. The good news is that in spite of management fees and a declining market, AMZA kept up with its levered benchmark. While this may seem like an easy task, it is not, as leverage is very hard to adjust and keep constant in declining markets. The bad news is that as we reiterated a few dozen times already, AMZA's option selling strategy has been effectively useless. No sugarcoating


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Analyst’s Disclosure: I am/we are long AMZA, UNIT, JMF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

We may trade any of these positions from either side without further notice. Trapping Value is a Co-author at "The Wheel Of Fortune". The Fortune Teller is a fan of Trapping Value.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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