The History of the MLP Index

An MLP or a Master Limited Partnership is also known as Publicly Traded Partnership (PTP)

. An MLP is highly flexible, as it combines the tax benefits of a limited partnership with the liquidity value of the share of a company. The MLP has the structure of a proper limited partnership, but produces units which are traded on a common exchange (just like shares of a company). In order to qualify for an enterprise to issue Master Limited Partnerships it needs to earn 90% of its profits through activities related to natural resources, real estate or commodities. MLPs started enhancing approved during the late 70s and early 80s, where initially they were used for asset securitization financing for real estate based businesses. Numerous MLPs, though , started failing during the 1980s. The design of a Master Limited Partnership was being used by businesses in cyclical industries or with depleting assets (e.g., exploration, development, retail, and consumer goods).

Now all these movements in the commercial background generated a bit of a stir. And MLPs were given due significance, when Standards and Poors devised their own index, listing a variety of MLPs. The S&P MLP Index was developed to purvey investors with exposure to the influential partnerships that trade on the NYSE and NASDAQ. The index includes both master limited partnerships (MLPs) and publicly traded limited partnerships or liabilities companies (LLCs), which have a equivalent lawful arrangement to MLPs and share the same tax benefits. The base value of the S&P MLP Index is 1000 on July 20, 2001. Data history begins on July 20, 2001. The everyday returns are listed from that specific date. Standard & Poors, the worlds leading index provider, announced today the launch of the S&P MLP Index, an index designed to serve the investment communitys demand for a tradable benchmark representing the fast growing, $200 billion Master Limited Partnership market. The index consists of leading, liquid Master Limited Partnerships trading on a important U.S. exchange. The launch of the S&P MLP Index is portion of Standard & Poors strategy of providing the market with tradable benchmarks for different asset classes.

The Alerian MLP index or AMZ (as it is commonly known) is also an critical index of the Master Limited Partnership structure. It came into presence on June 6, 2006, when JP Morgan formally announced its operation. The Alerian MLP Index is a composite of the 50 most obvious energy master limited partnerships and is designed by Standard & Poors using a float-adjusted market capitalization methodology. The index is disseminated real-time on a price return basis (NYSE: AMZ). The corresponding total return index will be disseminated everyday through ticker AMZX and is present on Alerians website. In addition, Standard & Poors calculates 10 years of historical index data on both a charge and total return basis. Alerian also publishes relevant constituent data points such as total market capitalization, and dividend yield everyday.

The narrative of MLP indices is really little surely, as the whole concept of an MLP is really new and upcoming. However, if one wants to go into the details of it, referral to the websites of the above mentioned indices would support.

The History of the MLP Index

By: Jim Knight

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