ETRACS Quarterly Pay 1.5X Leveraged Alerian MLP Index ETN (MLPR)

Overview

The ETRACS Quarterly Pay 1.5X Leveraged Alerian MLP Index ETN (MLPR) is an exchange-traded note designed to provide 1.5 times the monthly performance of the Alerian MLP Index, a benchmark for master limited partnerships (MLPs). It focuses on the energy infrastructure sector, utilizing leverage to amplify returns but also increasing risk. It is an ETN, not an ETF, and thus carries issuer risk.

Reputation and Reliability

UBS is the issuer. UBS has a global presence and established financial institution, but this ETN carries UBS's credit risk.

Management Expertise

UBS has experience in structured products. However, the performance is largely tied to the underlying index.

Goal

To seek a return linked to 1.5 times the monthly performance of the Alerian MLP Index, before fees and expenses.

Investment Approach and Strategy

Strategy: The ETN is designed to track the Alerian MLP Index with 1.5x leverage. It doesn't directly hold assets but provides exposure through a debt obligation of UBS.

Composition The ETN's value is linked to the performance of the Alerian MLP Index, which consists of publicly traded MLPs in the energy infrastructure sector.

Market Share: Low. MLPR has a small market share compared to broader energy or MLP ETFs.

Total Net Assets (AUM): 32270000

Key Competitors

• ALTM
• MLPX
• AMLP
• MLPI

Competitive Landscape

The market is dominated by non-leveraged MLP ETFs. MLPR's leveraged nature makes it a niche product with higher risk and potential reward. Competitors offer direct exposure to MLPs without leverage, appealing to a more risk-averse investor base. MLPR competes with similar leveraged products, although their market presence may be different.

Historical Performance: Performance is highly correlated with the Alerian MLP Index but amplified by the 1.5x leverage. Performance can vary widely based on the performance of the Alerian MLP Index and is subject to significant volatility. Past performance is not indicative of future results.

Benchmark Comparison: The ETN aims to provide 1.5x the performance of its benchmark index, the Alerian MLP Index. Tracking error and fees can impact its performance relative to the leveraged benchmark.

Expense Ratio: 0.85

Average Trading Volume

The average trading volume is moderate and can vary widely depending on market conditions, which can impact the ease of buying and selling the ETN.

Bid-Ask Spread

The bid-ask spread is typically wider than highly liquid ETFs due to the leveraged nature and lower trading volume, which can increase trading costs.

Market Environment Factors

Performance is sensitive to energy prices, interest rates, and changes in regulations affecting MLPs. Economic growth and energy demand significantly influence MLP profitability.

Growth Trajectory

The growth trajectory depends on the performance of the energy sector, MLP profitability, and investor appetite for leveraged products. The note also carries the risk of UBS creditworthiness impacting its value.

Competitive Edge

MLPR offers a leveraged play on the Alerian MLP Index, appealing to investors seeking amplified returns. Its 1.5x leverage provides higher potential gains but also greater risk compared to non-leveraged MLP ETFs. The ETN structure allows for exposure to MLPs without the complexities of direct MLP ownership. However, the ETN structure itself introduces credit risk from UBS. The appeal to investors willing to accept higher risk for potentially higher returns differentiates it from other MLP investments.

Volatility

Highly volatile due to its leveraged nature and the inherent volatility of the energy sector. Investors should expect significant price fluctuations.

Market Risk

Susceptible to market risk related to MLPs, interest rate risk, regulatory changes, and energy price volatility. It also has credit risk as it relies on UBS for payment.

Ideal Investor Profile

Suitable for sophisticated investors with a high-risk tolerance seeking leveraged exposure to the MLP sector. Not suitable for buy-and-hold investors or those with a low-risk tolerance.

Market Risk

Best suited for active traders who understand the risks associated with leveraged products and MLPs.

The ETRACS Quarterly Pay 1.5X Leveraged Alerian MLP Index ETN (MLPR) offers leveraged exposure to MLPs, targeting enhanced returns tied to the Alerian MLP Index. This ETN is best for short-term trades and not for long-term investing. Given the volatile behavior, leveraged structure, and dependence on UBS, it is best suited for high-risk tolerant investors. It is exposed to energy market fluctuations and the risks inherent in the MLP sector.

Data Sources:

• UBS ETRACS Website
• Alerian MLP Index Fact Sheet
• Various Financial Data Providers

Disclaimers:

The data provided is for informational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investing in leveraged products involves significant risk of loss.