This is an actively managed ETF that centers on master limited partnerships in energy infrastructure, such as oil and gas pipelines, and uses modest leverage and options strategies to boost distribution income. It adds leverage to midstream infrastructure in pursuit of high distributions.

It suits income-focused investors who want high distribution income from energy infrastructure and are willing to accept the additional volatility that comes with leverage.

The ETF is run with an active management approach by Infrastructure Capital.

The fund centers on midstream master limited partnerships that operate pipelines, storage, and processing facilities, while using modest leverage and options strategies to raise distribution income. Leverage expands exposure and increases distribution income, but volatility and risk rise along with it. The fund takes an active approach in pursuit of high distributions.

• Modest leverage combined with midstream exposure
• Options strategies to supplement distributions

Assets under management (AUM) stand at $472.1M, and the total expense ratio is 1.72% per year.

The main points of comparison with a standard MLP ETF that invests in midstream without leverage are the larger distributions and the added risk that come from using leverage.

Midstream infrastructure depends on oil and natural gas prices and transport volumes. Because this fund adds leverage, both gains and losses tend to be amplified compared with standard midstream products. The higher the distribution income, the greater the volatility tends to be.

Fund flows into leveraged energy income products diverge depending on the oil price outlook and demand for distribution income, and demand for high distributions can also shift money into related product groups. It is also worth noting that performance varies with the oil price cycle and leverage costs.

High distribution income boosted by leverage is both the strength and the risk. Amplified volatility, concentration in the energy sector, and leverage costs are the key considerations.

For investing in midstream master limited partnerships without leverage, direct substitutes include AMLP and MLPX, and for holding infrastructure mainly through equities, products such as EMLP are also worth comparing. For broad diversification across master limited partnerships, products such as MLPA can also be considered. The three funds shown in the table, PFFA, PREF, and DBMF, fall into the same broad income and alternatives category through preferred stocks and managed futures strategies respectively, but their assets differ from midstream, so they serve mainly as reference points. What differentiates this ETF is that it adds modest leverage and options strategies to midstream in pursuit of high distributions.

Here are the points to review before investing in AMZA. High distribution income is attractive, but amplified volatility, sector concentration, and leverage costs need to be checked in advance. It is also a good idea to compare it with midstream products that operate without leverage.

Swings in oil and natural gas prices, amplified volatility from leverage, and borrowing costs are the main drivers of short-term performance. Because of its concentration in the single energy sector and its use of leverage, drawdowns can be larger during market crashes. High distribution income comes with correspondingly high risk.

It is a suitable candidate for income-focused investors who want to add leverage to energy infrastructure in pursuit of high distribution income. For investing without leverage, consider products such as AMLP and MLPX, and if you want leveraged high distributions, it is advisable to compare this product alongside them before choosing.