Midstream/MLP ETFs See Strong Flows Amid Outperformance YTD

Midstream/MLP ETFs are experiencing strong inflows and are poised to outperform the broader market in the first half of 2025, driven by their attractive income and relative insensitivity to commodity price volatility. The Alerian MLP ETF (AMLP) and the Alerian Energy Infrastructure ETF (ENFR) have seen net inflows of $700 million and $66 million year-to-date, respectively, with AMLP yielding 7.4% and ENFR yielding 5.4% as of June 11. Year-to-date through June 11, AMLP is up 5.6% and ENFR is up 4.7%, compared to the S&P 500's 3.0% gain and the Energy Select Sector SPDR Fund's (XLE) 1.5% increase.

Analysis

Midstream/MLP Exchange Traded Funds (ETFs) are demonstrating robust investor interest and performance in the first half of 2025, positioning the segment for outperformance against the broader market. Specifically, the Alerian MLP ETF (AMLP) has attracted substantial net inflows of $700 million year-to-date through June 11, with $173 million in the past month alone, solidifying its position as the largest MLP ETF with $10.5 billion in assets. The Alerian Energy Infrastructure ETF (ENFR), the lowest-cost midstream ETF, has also seen positive net flows, accumulating $66 million year-to-date and $8 million in the past month, with $304 million in AUM. The appeal of these ETFs stems from their history of providing compelling income, with AMLP's underlying Alerian MLP Infrastructure Index (AMZI) yielding 7.4% and ENFR's Alerian Midstream Energy Select Index (AMEI) yielding 5.4% as of June 11. This income generation is particularly noteworthy as it is presented as generous regardless of the interest rate environment and superior to other energy subsectors and income-oriented investments. Furthermore, the midstream sector's fee-based business models contribute to stable cash flows, rendering these investments less sensitive to commodity price volatility. This resilience is reflected in year-to-date performance, where AMLP is up 5.6% and ENFR has risen 4.7%, outperforming both the S&P 500's 3.0% gain and the broader Energy Select Sector SPDR Fund's (XLE) 1.5% increase during the same period.

Key Decisions for Investors

• Investors seeking income and potential diversification within the energy sector should consider allocating to midstream/MLP ETFs like AMLP and ENFR, given their strong current yields and year-to-date outperformance.
• The relative insensitivity of midstream assets to commodity price fluctuations, due to fee-based revenue models, offers a defensive characteristic that may be attractive in volatile market conditions.
• Monitor fund flow trends and yield comparisons with alternative income investments to gauge continued investor appetite and relative value in the midstream space.