Van Eck Plans MLP ETF Too
June 21, 2010
Van Eck Global, the New York-based money management firm known for its Market Vectors commodity-related exchange-traded funds, submitted papers to the Securities and Exchange Commission to offer a passively managed ETF of master limited partnerships, making it the second such filing this month.
The fund will be based on the Market Vectors MLP Index and will be listed on the New York Stock Exchange. It didn’t say in the filing what the ETF’s trading symbol would be or what its expense ratio would be.
Van Eck’s filing follows a similar move by
In its filing, Van Eck said MLP ETFs are taxed as a regular corporation for federal income tax purposes. As a result, the ETFs would be subject to
It noted in the filing that changes in federal or state tax laws could hurt the tax treatment or financial performance of MLPs. The company noted that proposed changes, such as the
Tracking Error Vs. Credit Risk
Tracking error in general is one big difference between an ETF and an ETN. ETNs are debt issues backed by the good faith and credit of the issuer. That means ETN investors incur credit risk, but also get the exact return of a given benchmark after fees, eliminating the tracking error often associated with ETFs.
MLPs themselves have favorable tax structures. They typically derive at least 90 percent of their income from interest, real estate rental or natural resources development. Because the Internal Revenue Service views shareholders of the MLP as “partners” in the enterprise, an MLP isn’t required to pay taxes at the corporate level and thus avoids double taxation of its income.