Zacks Funds, a Chicago-based financial research firm and mutual fund manager, on June 20 plans to roll out through Exchange Traded Concepts’ ETF platform a pair of ETFs-one focused on dividend-paying stocks and the other serving up exposure to master limited partnerships.
At heart, both the Zacks Sustainable Dividend ETF (NasdaqGM:ZDIV) and the Zacks MLP ETF (NasdaqGM:ZMLP) are designed to serve up yield potential. ZDIV, costing 0.70 percent a year, invests in 100 U.S. dividend-paying stocks selected from a universe of 1,500 large-cap securities. ZMLP invests in 25 to 50 U.S.-listed MLPs and costs 0.75 percent.
Both funds track proprietary benchmarks that apply a quantitative rules-based multifactor methodology to pick and weight only the securities that show the highest yield potential from their respective market segments.
The two funds will be listed on Nasdaq, the No. 2 U.S. stock exchange that has a growing presence in the world of ETF primary listings.
MLPs are partnerships that generate most of their income from the natural resources sector, but they make money from fees rather than from the underlying commodities themselves, which protects them from volatility spikes in commodities prices.
Their special tax treatment-MLPs are not taxed as corporations-allows them to pay hefty dividends, an attractive feature for an investor looking for income.
ZMLP will go head to head against funds like the $3.1 billion ALPS Alerian MLP ETF (NYSEArca:AMLP), which until a few months ago was the only MLP-focused strategy in an ETF wrapper, and the $3.4 billion JP Morgan Alerian MLP ETN (NYSEArca:AMJ).
Newcomer to the space Global X MLP ETF (NYSEArca:MLPA), launched in April, will also give ZMLP a run for its money because MLPA is by far the cheapest MLP-focused portfolio in the market today. The $5.5 million fund costs 0.45 percent, while AMLP and AMJ each cost 0.85 percent.
ZMLP is the second MLP-focused ETF to be launched through Exchange Traded Concepts’ private label “ETF In A Box” solution.
Before it, Yorkville partnered with ET Concepts to launch the Yorkville High Income MLP ETF (NYSEArca:YMLP) in March. YMLP costs 0.82 percent and has gathered $30.7 million in assets since inception.