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Energy Infrastructure ETFs: Know What You Own

When it comes to choosing energy infrastructure investments, prioritizing ETFs with strong yield is a common strategy.

While many investors flock to products such as the Tortoise North American Pipeline Fund (TPYP) and the First Trust North American Energy Infrastructure Fund (EMLP), there are alternative options that can provide a higher yield. One such example is the Alerian Energy Infrastructure ETF (ENFR).

Per Bloomberg, ENFR has an indicated yield of 5.35% as of May 8. This marks a notable jump over the competition, with indicated yields for TPYP and EMLP sitting at 4.71% and 3.47%, respectively.

The success continues when analyzing the overall performance of ENFR over the last 12 months. FactSet data finds that as of May 10th, 2024, ENFR is up over 28% over the last 12 months. Meanwhile, FactSet reports that in the same timeframe, TPYP is up about 21% as of May 10th, 2024. EMLP’s returns are lower than the two, gaining about 18% over the last 12 months as of May 10th, 2024, according to FactSet.

Midstream Advantages

Examining the nuts and bolts behind ENFR can illuminate why the fund has performed so well. Unlike its competitors, ENFR does not include exposure to utility companies, which have lower yields and have been challenged in recent years by higher interest rates. ENFR focuses on midstream energy infrastructure companies in the US and Canada. Meanwhile, as of the end of 1Q24, TPYP had 15% weighted towards local gas distribution, while EMLP had about 29% toward electric power & transmission.

The fund is benchmarked to the Alerian Midstream Energy Select Index (AMEI). The index is cap-weighted, float-adjusted, and capped, providing exposure to companies engaged in midstream operations. Midstream investing can access the benefits of energy while avoiding direct exposure to the commodities themselves.

See More: Why Midstream is Worth Targeted Exposure

Additionally, ENFR boasts the lowest net expense ratio in its category, reducing costs for investors. ENFR’s net expense ratio is 0.35%, compared to 0.40% for TPYP and 0.90% for EMLP.

All in all, ENFR highlights the benefits of targeted midstream investing. The fund is outperforming its peers in terms of both yield and performance. Paired with a low net expense ratio, ENFR operates as a cost-efficient vehicle for energy infrastructure exposure.

vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for  ENFR, for which it receives an index licensing fee. However,  ENFR are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of  ENFR.

For more news, information, and analysis, visit the Energy Infrastructure Channel.

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