Net flows to the exchange-traded fund based on a bellwether midstream energy industry index turned negative in November, with master limited partnership tax-loss selling season in full swing and pipeline investor uncertainty on the rise.
The Alerian MLP ETF, which is based on the Alerian Master Limited Partnership Index, saw net outflows of just under $28.5 million, compared to $108 of net inflows million in October. For the year, the ETF has net inflows of $1.51 billion.
The index fell 2.8% in November as investors showed increasing skepticism about MLPs' distribution-focused strategy despite strong third-quarter financial performance. The middle of the month proved particularly tough for MLP stocks, which many industry observers pinned on income-driven investors exiting the oil and gas pipeline sector and institutional investors replacing them.
"For quite a few in mid-November, confusion overwhelmed conviction," Simon Lack, managing partner at the investment advisory firm SL Advisors LLC, wrote in a Dec. 3 blog post. "The transition away from traditional [MLP] investors with long holding periods has created one of the market's most volatile sectors."
Flows to the dozen broader energy ETFs tracked by S&P Global continued their decline with net outflows of just over $300 million in November, compared to $265.6 million of inflows the month before. SSGA's Energy Select Sector SPDR Fund saw $348 million in net outflows to drive the overall drop, even though West Texas Intermediate crude oil gained 5.6% during November to settle at $57.40 per barrel on Nov. 30.
Both the Alerian MLP ETF's and the broader funds' lackluster performances were attributed in part to the run-up to the Nov. 30 OPEC meeting, where cartel members and other countries agreed to extend oil output cuts through the end of 2018. "OPEC uncertainty ... weighed on sentiment," Lack noted.