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Investors show mixed interest in midstream ETFs during September


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Investors show mixed interest in midstream ETFs during September

Mostexchange-traded funds tracking pipeline operators and master limitedpartnerships pulled in money in September, but nearly $100 million of outflowsfrom the largest midstream ETF dragged the whole group into negative territory forthe month.

Among11 midstream-focused funds tracked by S&P Global Market Intelligence, ALPS'Alerian MLP ETF was the biggest loser with an outflow of $99.5 million inSeptember, according to FactSet data. ALPS' Alerian MLP ETF generally tracksthe Alerian MLP Infrastructure Index, and has nearly $8.88 billion of assetsunder management.

TheGlobal X MLP ETF emerged as the winner with an influx of $22.4 million. Its topholdings, among 22 midstream names, include Enterprise Products Partners LP, andMagellan Midstream Partners LP.The fund has $336.2 million of assets under management.

FactSetdata showed that the 11 midstream-focused funds overall saw a total net outflowof $41.9 million for September. Year-to-date, however, $1.24 billion has flowedinto the group of midstream ETFs.

"InSeptember, investors increasingly focused on the likelihood of the FederalReserve raising interest rates by the end of 2016. As such, large equityincome-oriented ETFs providing exposure to MLPs or utilities were out of favor.[The Alerian MLP ETF] is a good example of this trend," said ToddRosenbluth, head of ETFs and mutual funds research at equity research firm CFRA.

Againstthe backdrop of expecteddistribution growth and a rosierpicture for the sector, the Alerian MLP ETF's outflow left ALPS Advisors Inc.'sResearch Director Jeremy Held a bit surprised.

"Theoutflow numbers in September are frankly a bit puzzling," Held said in aninterview. "If you look at the overall macro-level picture, MLPs are notgrowing at a robust 10% to 15% clip. But their stock prices are starting todecouple from crude prices."

"You'reseeing a more favorable IPO environment and distribution environment," headded, referring to GenesisEnergy LP's 1.4% quarter-over-quarter dividend raise, announcedOct. 5, and Noble MidstreamPartners LP's well-receivedpost-Labor Day IPO.

Heldbelieves that investors, after taking profits through the summer to cash in onthe MLP stock price rallyfrom February lows, could now be de-risking their portfolios as the fourthquarter rolls along.

ALPS'Alerian MLP ETF pulled in $376.3 million of new money in August, nearlytripling its net inflows from $137.3million in July. It has gathered $833.8 million of new moneyyear-to-date. "Evenincluding the outflows in September, more than half of the inflows for the yeartook place in the third quarter," Held said.

Lookingat broader energy funds, the Energy Select Sector SPDR Fund posted the largestoutflow of $533.4 million.