Last month a new exchange-traded note slipped under the radar and received very little notice. The JPMorgan Alerian MLP Index ETN began trading under the ticker AMJ on April 2.

AMJ tracks an index of Master Limited Partnerships – partnerships that trade on U.S. exchanges and are usually connected to energy pipelines and storage. They are income-oriented investments that are usually bought for their high yield and low correlation to stocks, bonds and real estate. Some examples are Kinder Morgan Energy Partners (KMJ), ONEOK Partners (OKS), and Enbridge Energy Partners (EEP).

The partnership structure of MLPs brings certain tax benefits. It also creates tax complications which can be annoying. AMJ helps reduce the hassle by paying a quarterly coupon and accounting for MLP income on a 1099 rather than a K-1 form. There is also a diversification benefit in owning a package of MLPs rather than a smaller number of individual issues, which tend to be illiquid.

While AMJ may be attractive to investors who desire high current yield, the risks are substantial. Total returns can vary dramatically based on movements in the energy sector. Furthermore, the ETN structure itself is risky. Investors could lose money if the issuer should go into default.

This is the second ETN to track the Alerian MLP Index. The other one, BearLinx Alerian MLP Select Index ETN (BSR), was launched in 2007 and currently has about $64 million in assets. Since the demise of Bear Stearns, JPMorgan Chase is also the company behind BSR. Alerian has announced the discontinuance of the “Select” version of the index effective May 15. At that time, the two products should be identical.

We can’t help but speculate that the next step will be to merge the two ETNs. This will provide a means to eliminate the BearLinx name while preserving the track record. It may also explain the lack of announcements for the new AMJ product back in April.

AMJ is showing decent volume for such a new product, so JPMorgan Chase may have found a winner. Income investors who understand the risks should take a look. This AMJ Fact Sheet (PDF format) has more information.