Earlier this year, the Yorkville High Income MLP (YMLP) and Yorkville High Income Infrastructure MLP (YMLI) ETFs filed with the SEC to drop the “Yorkville” from their names as part of an agreement with Van Eck Global, operators of the popular Market Vectors brand. While the Yorkville ETFs will sport the Market Vectors moniker should shareholders approve the change, Yorkville Capital has continued on with its MLP business.
Reduced Volatility and Tax Complexity
In a recent move, the firm launched an innovative MLP hedge fund with the help of a large institutional investor as the seed client. The new Yorkville MLP Alpha Hedge Fund addresses institutional investors’ top MLP concerns: price volatility and tax complexity.
“We created our long-short strategy to address the main reason institutional investors avoid the MLP asset class, primarily price volatility,” said Yorkville Capital CEO Darren Schuringa, in a recent statement. “Significant drawdowns are untenable for institutional investors.”
The long portion of the fund’s long/short hedged strategy will be run in the same manner as Yorkville’s award-winning MLP Core Income Strategy. Its fundamentals-based short portfolio is designed to deliver alpha in up markets and provide alternative beta exposure during corrections.
Swap Based Structure
In terms of taxes, the Yorkville MLP Alpha Hedge Fund addresses the complexities that “have kept institutional investors at bay,” according to Mr. Schuringa, with an “innovative swap-based fund structure” that does away with K-1s for U.S. investors and U.S. filing requirements for non-U.S. investors.
“The market has been waiting for an investment vehicle that encourages institutional and foreign investment in U.S. energy infrastructure,” added Mr. Schuringa. “The seeding of our new fund is indicative of growing institutional and foreign interest in a heavily oversold, yet fundamentally sound asset class.”
In addition to the new hedge fund and separate accounts, Yorkville also manages the James Alpha Yorkville MLP Fund (NASDAQ: JAMLX) and is the index provider for the RBC Yorkville MLP Distribution Growth Leaders Liquid Index ETN.
Jason Seagraves contributed to this article.