Understanding 2023's Top Midstream ETF Performance: A Deep Dive into Four Leading Funds

The midstream etf space delivered impressive returns throughout 2023, with a select group of funds capturing investor attention through compelling income distributions and energy infrastructure exposure. Among the four largest midstream etf offerings—each representing billions in assets—significant performance divergence emerged, revealing crucial insights for income-focused investors evaluating their energy sector allocation.

The $7.3 billion Alerian MLP ETF (AMLP) dominated the field, while the $2.4 billion First Trust North American Energy Infrastructure Fund (EMLP), $1.5 billion Global X MLP ETF (MLPA), and $975 million Global X MLP & Energy Infrastructure ETF (MLPX) followed in varying degrees. However, asset size alone didn’t guarantee investor flows in 2023, with fund inflows reflecting more nuanced performance and cost considerations.

Return Performance Rankings Among Leading Midstream Vehicles

The four funds posted notably different total return profiles throughout 2023. AMLP led the pack with a 20.9% year-to-date return, substantially outpacing its peers. MLPA delivered 15.7%, while MLPX trailed at 14.3%. EMLP significantly underperformed, returning only 6.6%, lagging all competitors by a considerable margin.

This performance gap wasn’t random. EMLP’s overweight positioning in the utilities sector—comprising over 45% of the fund’s holdings—exposed it to different market dynamics than its pure-play midstream competitors. This sector allocation mismatch illustrated a critical lesson: midstream etf strategies can diverge significantly based on underlying portfolio construction, even when they target similar markets.

Fee Structures and Their Impact on Net Investment Flows

Cost efficiency emerged as a decisive factor in the 2023 flows picture. AMLP charged 85 basis points, while EMLP topped the expense scale at 95 basis points. MLPA and MLPX both maintained leaner fee structures at 45 basis points each.

Despite AMLP’s commanding size advantage, the fund also captured the most substantial investor interest, attracting $276 million in net flows year-to-date through December. MLPA garnered $29 million in modest inflows, while EMLP and MLPX both faced redemptions, experiencing outflows of $346 million and $162 million respectively. The fee differential, combined with performance divergence, proved decisive in investor capital allocation.

Income Distributions: Comparing Dividend Yields Across Funds

Dividend yield remains the cornerstone appeal of midstream etf investing, and 2023’s yield environment revealed distinct opportunities across the four funds. AMLP’s indicated dividend yield of 8.2% positioned it as the income champion. MLPA followed at 7.8%, while MLPX offered 5.4%. EMLP trailed considerably at 4.1%, a significant disadvantage for income-focused investors.

These yield differentials reflected both the underlying asset compositions and market-clearing valuations across the four funds. Investors prioritizing current income generation faced a clear choice, with AMLP emerging as the superior option on both total return and dividend metrics.

Investment Takeaways for Midstream ETF Investors

The 2023 performance comparison underscores several important considerations when evaluating midstream etf options. Fund-level performance divergence, fee structures, sector weighting decisions, and income distributions collectively determine investor outcomes. AMLP’s dual advantage—superior returns paired with the highest dividend yield—explains its commanding flow advantage in 2023. Conversely, EMLP’s utilities overweight and higher expense ratio created headwinds that outweighed any other strategic considerations. For investors seeking exposure to midstream infrastructure, understanding these nuanced differences remains essential to portfolio optimization.