ETF Spotlight: ‘Smart-Beta,’ Master Limited Partnerships

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ETF Spotlight on the Direxion Zacks MLP High Income Shares (ZMLP) , part of an ongoing series.

Assets : $20.7 million

Objective : The Direxion Zacks MLP High Income Shares fund tries to reflect the performance of the Zacks MLP Index, which is comprised of 25 Master Limited Partnerships and weighted on a rules- or factor-based methodology, as opposed to traditional market-cap weighted indices.

Holdings : Top holdings include Emerge Energy Services (EMES) 5.3%, NuStar GP Holdings (NSH) 4.8%, CVR Partners (UAN) 4.7%, NuStar Energy (NS) 4.4% and PetroLogistics (PDH) 4.3%.

What You Should Know :

  • Direxion Funds sponsors the ETF.

  • ZMLP has a 0.65% expense ratio.

  • The ETF has 25 holdings and the top ten positions make up 44.0% of the overall portfolio.

  • Component holdings are equally weighted and rebalanced quarterly to make up 4% of the total portfolio.

  • The underlying index selects holdings based on various factors, including yield, liquidity and relative value, among others.

  • Holdings are ranked based on a quantitative rules-based methodology, including value, liquidity, short interest, dividend yield and other factors and is sorted from highest to lowest.

  • ZMLP began trading January 24, 2014.

  • The fund is up 2.7% over the past month, up 6.4% over the last three months and up 4.2% since inception.

  • The ETF offers a current yield of 5.3%.

  • The ETF is structured as a “C-Corp,” so investors will not have to fill out K-1s come tax season.

  • However, as a C-Corp, the ETF will owe taxes on the holdings and are subtracted from the fund’s value. [How MLP ETF Structures Affect Yields and Returns]

  • MLPs have traditionally provided low correlation to traditional stocks and bonds and offer attractive yields for income investors.

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