As I alluded to in my original article, I don't think the current shareholders understand what they bought, and now that misunderstanding has reached a level of $128 million. Who is to blame for this? I'm sure some will point their finger at the Securities and Exchange Commission saying it should not have approved this ETF. However, if the SEC only saw the prospectus and the Statement of Additional Information, maybe they didn't know about the 37.5% daily clipping factor either.

Representatives from ALPS and Alerian discussed this article with me under the condition that I not quote them and not use their names. Both confirmed the daily NAV change calculation is reduced by about 37.5% from the daily index change calculation.

ALPS and Alerian maintain that AMLP will still deliver superior long-term after-tax results when held in a taxable account. The taxation of MLPs is a difficult subject so perhaps that is true. But I have trouble understanding how it is possible when AMLP is taking a 37.5% daily hit upfront.

Rowland has no positions in the securities mentioned.
Ron Rowland is the founder and president of Capital Cities Asset Management, a fee-based registered investment adviser in Austin, Texas. He is also the founder and publisher of Invest With An Edge and All Star Investor, where he has been providing market commentary and active investment advice since 1991. Opinions expressed in this article should not be considered personal recommendations to buy or sell any security.

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