What percentage of the Alerian MLP Infrastructure Index (AMZI) consists of upstream names?
The AMZI contains no upstream names. This index is 100% infrastructure and the sector weightings as of September 30th are 43% Petroleum Transportation, 15% Natural Gas Transportation, and 42% Gathering & Processing. That means, if you own AMLP, MLPI, MLPL, or any of the Canadian return of capital notes, you do not have direct upstream exposure. I repeat: you do not have direct upstream exposure.
There are currently 125 energy MLPs and of those, 17 are upstream names:
As of the special rebalancing which took place at the close of business on October 1st, only Vanguard Natural Resources (VNR) is a member of the AMZ, and its weight was a mere 0.35%. The highest exposure the AMZ has had to upstream companies over the past five years was 8.2% in early 2012, with a total of 15 upstream companies in the index. Over the past year, however—I’m stating the obvious here—lower commodity prices and distribution cuts have driven the equity values of upstream names down, resulting in a significant decline in both the absolute number and weight of upstream names in the index.
Looking at the broader MLP space, as of September 30th, the total market cap was $354 billion. Of that, only $8 billion, or 2.3%, was attributed to upstream businesses. Truth be told, upstream companies have never captured a significant portion of the MLP market cap. At its height in 2007, only 8%, or $5 billion of the $133 billion market cap, belonged to upstream names.
It’s important for MLP investors to remember that only a small percentage of MLPs have cash flows directly exposed to commodity prices. Most MLPs are instead indirectly exposed to commodity prices through volumes.
For future reference, all of our fact sheets contain sector exposure breakdown and can be downloaded from each index’s respective page.