Which Midstream Energy ETF Delivered the Best Returns This Year?

The midstream energy sector emerged as one of 2023’s strongest performers, with major index funds capturing significant gains for income-focused investors. Four flagship vehicles dominate this space: the Alerian MLP ETF (AMLP) commanding $7.3 billion in assets, alongside the First Trust North American Energy Infrastructure Fund (EMLP) at $2.4 billion, the Global X MLP ETF (MLPA) with $1.5 billion, and the Global X MLP & Energy Infrastructure ETF (MLPX) holding $975 million.

What’s striking about 2023’s capital flows tells an important story. Despite midstream energy’s compelling valuations and strong fundamentals driven by M&A activity and growing dividend payments, investor money showed a clear preference. AMLP alone captured $276 million in net inflows year-to-date through December 20, while MLPA attracted a modest $29 million. The picture reversed dramatically for the other two: EMLP experienced $346 million in outflows, while MLPX saw $162 million leave the fund.

Understanding the Performance Gap

The divergence in returns reveals why AMLP pulled ahead in the midstream energy ETF race. Through December 20, the Alerian fund surged 20.9% on a total return basis, substantially outpacing MLPA’s 15.7% gain and MLPX’s 14.3% appreciation. Meanwhile, EMLP lagged considerably, advancing just 6.6% year-to-date—a meaningful shortfall that left many investors questioning their allocation.

EMLP’s underperformance stems partly from its structural positioning. The First Trust fund maintains over 45% exposure to utilities rather than pure midstream energy infrastructure, a strategic tilt that proved disadvantageous in 2023. Additionally, EMLP carries the highest fee burden among the four, charging 95 basis points annually. By contrast, AMLP’s 85 basis points expense ratio, combined with MLPA and MLPX’s cheaper 45 basis point structures, gave them cost advantages that compound over time.

The Dividend Yield Advantage

Income generation separates the best performers in the midstream energy space. Investors flock to these vehicles precisely for their distribution potential, making yield comparison essential.

AMLP demonstrated superior distribution power with an 8.2% indicated yield as of December 20. This commanding edge reflected its better overall positioning within the midstream energy sector. MLPA followed with a respectable 7.8% yield, while MLPX offered 5.4%. EMLP trailed the group at 4.1%—yet another disadvantage stemming from its utilities overweight and structural differences from pure midstream energy exposure.

The combination of AMLP’s strong total returns and leading dividend yield explains much of its appeal to both institutional and retail investors during 2023. While the broader midstream energy sector delivered defensive characteristics and compelling income prospects, AMLP captured those benefits most effectively.