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Monday, May 09, 2011|
The WSJ Raises Concerns About MLP Funds
For fundsters that operate mutual funds investing in master limited partnerships or are thinking of doing so, an article over the weekend by the Wall Street Journal's Ian Salisbury is worth a look.
As Salisbury notes, there have been a number of MLP mutual funds that launched in 2010. He writes that "investors might want to think twice about diving in," pointing to "a quirk in the funds' tax treatment has made portfolios perform so unpredictably."
MLPs aren't subject to federal and state corporate-income tax, hich amounts to some 40 percent, but mutual funds that bet on MLPs don't enjoy those same advantage. For example: The Alerian MLP Infrastructure Index, an industry benchmark, was up 30 percent in the past year through last Thursday, but the $511 million SteelPath MLP Select 40 Fund [see profile] , which launched in 2010, is up just 18 percent. And the $1.1 billion ALPS Alerian MLP ETF [see profile], is up 11 percent since inception last August.
Brian Watson, director of research at SteelPath, conceded to the pub that: "It's not perfect, but it's the best you can do."
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