UBS added to its extensive lineup of MLP products this week with Monday’s (11/1/10) launch of UBS E-TRACS Wells Fargo MLP Index ETN (MLPW). There have been nine exchange-traded products associated with Master Limited Partnerships (MLPs) introduced the past few years. Only eight of them remain with us after JPMorgan’s abrupt delisting of BearLinx Alerian MLP ETN (former ticker BSR) in 2009.

These new MLPW exchange-traded notes (ETNs) are senior, unsecured, unsubordinated debt securities, and therefore carry the inherent credit risk of UBS (the issuer). The underlying Wells Fargo MLP Index is a float-adjusted, capitalization-weighted index of all energy MLPs listed on the NYSE or NASDAQ. If this sounds familiar it is because the description is essentially the same as the underlying index used by JPMorgan Alerian MLP Index ETN (AMJ).

The largest holdings and weightings of the two indexes are nearly identical. As of October 25, the Wells Fargo MLP Index shows its largest constituents as Enterprise Product Partners LP (EPD) 13.2%, Kinder Morgan Energy Partners LP (KMP) 10.0%, Plains All American Pipeline LP (PAA) 5.6%, Energy Transfer Partners LP (ETP) 5.4%, and Magellan Midstream Partners (MMP) 4.3%.

An annual investor fee of 0.85% is also identical to that of AMJ. Theoretically, the only differences between MLPW and AMJ should be the credit risk of the issuer and the liquidity of the notes. There may also be subtle differences related to index calculation and rebalancing.

Although there are credit concerns with ETNs, daily tracking should be nearly spot on and not suffer from the 37.5% daily tracking error of Alerian MLP ETF (AMLP). Additional information is available from the press release, summary page, and fact sheet (pdf).

Disclosure covering writer, editor, and publisher: Long AMJ. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.