trending Market Intelligence /marketintelligence/en/news-insights/trending/8ioftemojkzcmj-gb6fsaw2 content esgSubNav
In This List

Flows to leading energy pipeline ETF slowed in May amid consolidation wave

Podcast

Next in Tech | Episode 49: Carbon reduction in cloud

Blog

Using ESG Analysis to Support a Sustainable Future

Research

US utility commissioners: Who they are and how they impact regulation

Blog

Q&A: Datacenters: Energy Hogs or Sustainability Helpers?


Flows to leading energy pipeline ETF slowed in May amid consolidation wave

Net flows to the oil and gas pipeline industry's largest exchange-traded fund fell by more than half in May as a wave of energy company consolidations threatened to wipe out some large pipeline partnerships in the wake of federal tax changes.

Net flows to the Alerian Master Limited Partnership ETF were nearly $207.6 million for the month, down from $422.1 million in April. The fund flows, while reduced in May, brought the ETF to positive net flows for the year to date.

The ETF is based on the Alerian MLP Index, which tracks master limited partnerships in the sector and gained 5% on a total-return basis, including distribution income, in May. It rose 8% the previous month.

Partnerships' required cash payments to general partners and high equity costs continue to make the C-corporation structure more attractive. Energy infrastructure heavyweights Enbridge Inc. and Williams Cos. Inc. both announced multibillion-dollar roll-ups of their partnerships in May, which when combined with other reorganization deals announced so far in 2018 means the Alerian Index could lose about a dozen constituents this year.

SNL Image

"Managers of MLP-dedicated funds are telling their clients not to worry. ... But a shrinking index is rare in finance, and offers the fund manager few good options," SL Advisors LLC Managing Partner Simon Lack wrote in a June 3 blog post.

Even the Master Limited Partnership Association acknowledged the shift away from MLPs, rebranding its annual meeting to include midstream corporations such as Williams, Kinder Morgan Inc. and ONEOK Inc. Discussions during the 2018 meeting in late May centered around corporate restructuring, according to analysts and investment professionals.

SNL Image

Still, equity analysts at Barclays noted in a June 4 note to clients that the Alerian Index in May outperformed the S&P 500 as the midstream sector saw "risk-on appetite as an improving commodity backdrop supported sentiment."

The price of West Texas Intermediate crude oil, however, was down 2.2% for the month. The benchmark settled at $67.04 per barrel May 31.

The dozen broader energy ETFs tracked by S&P Global Market Intelligence, meanwhile, saw net inflows of $290.3 million in May after recording $415.8 million in net outflows in April.

SNL Image