New MLP ETNs Offer Tax Benefits

Oct 9 2013 | 10:12am ET

Investors are flocking to a new kind of exchange-traded note that offers access to master-limited partnerships, but with less of a tax bite.

MLP exchange-traded products have taken in $9.6 billion in new money this year, more than they took in all of last year, Morningstar reports. Much of the attraction can be traced to so-called "second-generation" MLP ETFs that offers less of a tax liability than MLPs, which invest in energy assets, generally feature.

The second-generation products avoid the tax hit by not actually owning most of the MLPs they track, The Wall Street Journal reports. If the products keep their MLP ownership to below 25%, they do not carry corporate tax rates.


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