The largest exchange-traded fund for the oil and gas pipeline industry lost more than $640 million in February as investors continued to shift money away from midstream master limited partnerships.
The Alerian MLP ETF, which is based on the Alerian Master Limited Partnership Index, experienced net outflows of over $665 million, skyrocketing from just $21.5 million in net outflows in January. The Alerian Index, meanwhile, lost over 9% on a total-return basis in February in concurrence with the energy industry's overall grim performance. MLP stock values weakened despite improving quarterly results.

"Everything floundered in the month of February," Barclays analysts wrote in a March 5 note to clients. "After registering a healthy month of funds flow to start the year, February flows turned negative in week two and averaged negative $333 [million] over the last 3 weeks of the month."
Pipeline executives were particularly frustrated that the progress made in fourth-quarter earnings did not translate into rising share prices. Companies like Enterprise Products Partners LP and Kinder Morgan Inc. saw valuations lag despite successful, investor-friendly reorganizations.
Partnerships have faced pressure from investors focused on long-term stability to eliminate the incrementally increasing quarterly cash contributions funneled to their general partners. By releasing their MLPs from incentive distribution rights, or IDRs, general partners no longer deplete the pool of cash available for reinvesting in the business. This simplification trend has developed alongside a sectorwide push toward modifying distribution growth to self-fund equity capital, which requires more liquidity at the top.

Still, MLPs that pledged in February to simplify their corporate structures were spurned on Wall Street. After announcing its merger with NuStar GP Holdings LLC on Feb. 8, NuStar Energy LP units plummeted 30% to close out the month at $21.94 on Feb. 28. Investors also declined to reward Tallgrass Energy Partners LP following a Feb. 7 announcement that it is evaluating options for reorganizing with Tallgrass Energy GP LP. The MLP's shares dropped 11.6% and ended February at $38.35 per unit.
Meanwhile, the $938 million in net flows in January into the dozen broad energy ETFs tracked by S&P Global Market Intelligence reversed course in February to total $509 million in net outflows. The price of West Texas Intermediate crude oil suffered its first loss in months, ending February down 5% at $61.64 per barrel on Feb. 28.

