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Midstream energy ETFs saw net inflows in July even as leader lagged

Against a backdrop of higher oil prices and flat market returns, the midstream master limited partnership sector's leading exchange-traded fund still saw net outflows in July.

The Alerian MLP ETF posted net outflows of $34.6 million, a $61 million reduction from June's net outflows of $95.4 million. West Texas Intermediate crude oil edged higher during July to close at $49.16 per barrel on the last day of the month, up almost 7% over the June 30 settle price. The Alerian MLP index, which tracks the major pipeline MLPs and is the basis for the ETF, was flat for the month.

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The other 10 midstream-focused ETFs tracked by S&P Global Market Intelligence, meanwhile, saw more than $100 million in inflows in July, for an overall total of $68.3 million in inflows among the 11 funds. In June, the group of ETFs saw $4 million in net inflows.

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Investor interest in a dozen broader energy funds tracked by S&P Global Market Intelligence declined steeply, with net outflows ballooning from $9.5 million in June to $393 million in July.

"Fund flows are being re-circulated rather than expanding overall," CBRE Clarion Securities analyst Hinds Howard wrote in an Aug. 6 blog post. "With the sector on firmer footing than it has been in recent years, the capital recycling is not a 're-arranging the deck chairs on the Titanic' situation, but the overall dearth of fund flows will likely drive consolidation longer term as MLPs able to access capital markets grind away [at] those with high cost of capital."

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