Policies & Methodology

The Cushing^® 30 MLP Index (Ticker: MLPX) provides a benchmark to measure the performance of the more stable and widely held energy infrastructure master limited partnerships (MLPs). The Cushing^® 30 MLP Index is an equal weighted index that uses a formula based, proprietary valuation methodology to rank the MLPs for inclusion in the index. The Cushing^® 30 will be calculated by Standard & Poor’s using the proprietary valuation methodology set out by Swank Energy Income Advisors for the Cushing^® 30 MLP Index and as appropriate for application to the master limited partnership investment universe and this index mandate. The index will be disseminated real-time on a price return basis and quoted under the ticker symbol "MLPX". The corresponding total return index is calculated on an end-of-day basis and will be disseminated daily through its ticker symbol, "MLPXTR".

The Cushing^® 30 MLP Index compared to similar MLP indices:

The publicly traded MLP asset class began to emerge as an investable asset class in mid to late 2001. Using historical data from August 2001 thru September 2009, the Cushing^® 30 equal weighted index would have generated a total return of 277%* versus the market capitalization-weighted index, as measured by the AMZ MLP Index, which generated a total return of 150%*, thus showing that an equal weighted index would have handily outperformed the market capitalization index. In addition both the equal weighted Cushing^® 30 MLP index and the market capitalization MLP index would have dramatically outperformed the S&P 500 index mainly due to the strong attributes of the MLP asset class (S&P 500 had a total return of 17%* during the same time period).

*Data source: Bloomberg Data

Equal weighted vs. market weighted indices:

The out performance of the Cushing^® 30 versus the AMZ market capitalization index is due to the design and construction of the Cushing^®30 index. By using an equal-weighted approach and fundamentally based ranking system there is an emphasis on the importance of cash flow and cash distributions rather than market capitalization. Because cash flow and cash distributions drive returns, the Cushing^® 30’s equal weighting and proprietary ranking system gives the index a distinct advantage over other market-capitalization MLP indices.

The inherent flaw in a market cap weighted index is that, as stocks increase in price, the value of the stock in the index goes up. This fluctuation leads to an overweighting in potentially overvalued stocks and an underweighting in potentially undervalued stocks. Using an equal weighting methodology, as well as proprietary ranking system Swank’s Cushing^® 30 is not subject to the inherent flaws of a market capitalization index. The Cushing^® 30 MLP Index has been developed for actual use by portfolio managers providing a realistic portfolio with allocation levels appropriate to and representative of an investable opportunity set.