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  • Monday Mailbag: How To, Part 2

    09/29/15 | Karyl Patredis

    If an MLP is expected to be removed from the AMZI, how many units of that MLP will need to be sold during the rebalancing process?

    Last week, we taught you how to find a rough estimate of the number of units that would need to be sold of a particular name when it exits the Alerian MLP Index (AMZ). This week, we’re going to explain how to do the same thing for a name on its way out of the Alerian MLP Infrastructure Index (AMZI).

    The first step is to figure out that MLP’s weight in the AMZI.

    1. Visit alerian.com.
    2. On the blue bar at the top of the page, click “Indices”.
    3. Once on the Indices page, click the orange AMZI circle.
    4. Once on the AMZI page, click the 3rd button from the left under the chart labeled “Constituents Download”. This should download an Excel workbook onto your machine called “Alerian MLP Infrastructure Index Constituents”.
    5. In the Excel workbook, update all the prices in Column D to the most recent prices.
    6. Updating the prices will change the Weight percentages in Column J. Note the updated weight of the name in which you are interested.

    The second step is to figure out which products are designed to track the AMZI.

    1. Visit our Linked Products Page, found by clicking “Products” in the blue bar at the top of our website. In the far right hand column labeled Index, you’ll find the underlying index for each product. Since we’re focusing on the AMZI in this exercise, you’ll see that there are six products that track the AMZI:
      1. Alerian MLP ETF (AMLP)
      2. ALPS Alerian MLP Infrastructure Fund (ALERX)
      3. CIBC Alerian MLP Infrastructure Index-Linked ROC Notes
      4. ETRACS Alerian MLP Infrastructure Index ETN (MLPI)
      5. ETRACS 2x Leveraged Long Alerian MLP Infrastructure Index ETN (MLPL)
      6. ETRACS 1x Monthly Short Alerian MLP Infrastructure Index ETN (MLPS)

    The third step is to figure out the total AUM of these products. Let’s start with AMLP.

    1. Click on “AMLP” on our products page. This will take you to ALPS’ webpage for AMLP.
    2. In the left hand column, in the box labeled AMLP, look at Total Net Assets. We’ll call this number “a”.

    Now we’ll do ALERX.

    1. We recommend visiting Yahoo Finance and typing in ALERX in the search bar. Find the number listed next to Net Assets. We’ll call this number “b”.

    Next, CIBC Alerian MLP Infrastructure Index-Linked ROC Notes.

    1. While on the Alerian website, roll your mouse over “News & Media” in the blue bar at the top.
    2. Scroll down to “Presentations” and click on the word.
    3. Look for the most recent presentation containing the slide titled, “About Alerian // Alerian index-linked products”. As of publication, the most recent presentation containing this slide is titled Private Wealth Connection June 2015 – Guide to MLP Investing. View slide 4.
    4. Look for the row containing the CIBC ROC Notes. The related dollar amount of total assets is listed in the far right hand column. This number is denoted as “c” in the formula below.

    Finally, the process for MLPI, MLPL, and MLPS is very similar to finding AMU’s AUM for AMZ in Part 1.

    1. While on our products page, click on “MLPI”. This will take you to UBS’ webpage for MLPI.
    2. Click on the grey tab labeled “Performance”.
    3. In the right hand column, look for the “Current Market Cap” number. This number will be labeled as “d” in our formula.
    4. Repeat this process for MLPL (“e”) and MLPS (“f”).

    Putting it all together.

    1. Add numbers “a” thru “e”, and subtract “f” from that total.
    2. Multiply by the weight of the name in which you are interested. This will give you the dollar amount of the name to be removed.

    (a+b+c+d+e-f)
    X  weight of the name in which you are interestedSnipdollar amount of the name to be removed

     

    1. Divide the dollar amount of the name to be removed by the price of the name in which you are interested. This will give you the number of units that will need to be sold in order to reflect the removal.

    dollar amount of the name to be removed
    ÷ price of the name in which you are interestedSnipunits that will need to be sold in order to reflect the removal