Exchange-traded products (ETPs) are wildly popular. Their assets grew
more than 30% a year during the past decade, compared to just 5% to 6%
for mutual funds [1],
according to McKinsey & Co. The management consultancy projects ETP
assets will more than double over the next five years to $3.1-$4.7
trillion, from a little over $1.5 trillion today.
Most of the growth is in exchange-traded funds (ETFs), a subclass of
the exchange-traded product family. But a handful of exchange-traded
notes (ETNs) are also a small part of this market [2].
And while there are ETFs for everything from copper to cocoa, ETNs offer [3]
a unique type of exposure to mainly two high-yield groups: master
limited partnerships (MLPs) and business development companies (BDCs).
Readers of my High-Yield Investing [4]
newsletter know that I'm a big fan of MLPs and BDCs. These unique
businesses allow investors to capture higher yields than many blue chip
stocks and bonds [5].
MLPs are in the pipeline business, transporting oil and natural gas from the drilling site to the "downstream [6]" facilities such as refineries and storage facilities. They earn a fee based on the volume [7]
transported, and in turn are not as sensitive to energy prices as
drilling companies, for example. This provides a reliable stream of
income, much of which is passed right on to investors in the form of
sizeable dividends. (more)
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