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Master Limited Partnerships, or MLPs, are growing in popularity among a variety of investors. This is largely thanks to their high payout potential and relative safety compared to other corners of the energy world.

This safety stems from the ‘toll way’ models of these businesses, as MLPs often operate pipelines or similar energy assets that ferry oil, natural gas, and other products across the landscape. Since the commodities have to move no matter what  the underlying price of oil or any other natural resource is, firms in this space are generally have a much more stable revenue picture.

Beyond this stability, yields are also pretty high thanks to some favorable tax rules that push firms in this space to pay out substantially all of their income to investors on a regular basis. This results in more than 90% of income going out to partners in order to avoid the issue of corporate taxation, a factor that along with the generally stability, makes the segment an increasingly popular one with investors.

Yet, unfortunately, there are still some tax headaches when using this structure, namely the need for a K-1 form come tax time. This situation has kept some investors at bay in the MLP space as taxes are often already enough of a hassle without the addition of more forms or rules, especially when plenty of other high yield options already exist in the market (see Can You Beat These High Dividend ETFs?).

However, there could be a way to avoid the issue by looking to MLPs that use an exchange-traded structure. While MLP ETFs still face the K-1 issue at tax time, those that utilize an ETN structure will not.

That is because of the inherent differences between the ETFs and ETNs which prevent a product that is structured as a ‘note’ from needing a K-1. While there a few key differences between these two types, the most important in this case is that ETNs do not actually hold the securities of an underlying index (also read ETFs vs. ETNs: What’s The Difference?).

Instead, an ETN is an unsubordinated debt security that promises to pay out a return that is equal to an index. This is completely unlike an ETF which buys and sells the securities that make up a particular benchmark.

Since an ETN doesn’t actually hold the securities, there is no need to be classified as a partner and so a K-1 is unnecessary. Due to this ‘loophole’ investors can buy up MLPs without the hassle of K-1s at tax time, making MLP ETNs an excellent choice for those looking for exposure to the segment without the taxation headaches.

For these investors, we have highlighted a handful of MLP ETNs below, any of which could make for quality picks that still avoid some of the key issues that plague not only general MLP investments, but MLP ETFs as well:

 JPMorgan Alerian MLP Index ETN (AMJ - ETF report)

This is easily the most popular MLP ETN out there with just over $5.2 billion in assets under management and daily volume over 1.2 million shares a day. The ETN looks to track the Alerian MLP Index and the product has been on the market since April of 2009, making it a pretty old note as well.

The note holds about 50 securities in its basket and charges investors 85 basis points a year in fees for its services. The yield comes in at a robust 4.9% suggesting that it could be a decent source of yield as well (read Three Overlooked High Yield ETFs).

In terms of individual holdings, no one company makes up more than 8% of assets, while pipelines account for just over half of the total from an industry perspective. From a market cap look, large caps account for 45%, while mid caps (34%), and small/micro (22%) also receive decent allocations as well.

Morgan Stanley Cushing MLP High Income Index ETN (MLPY - ETF report)

Although this note suffers from low volume—and thus wide bid ask spreads—it could be an interesting yield destination for those looking for more exposure to the MLP space. The product tracks the Cushing MLP High Income Index, holdings 30 energy and shipping focused firms based in North America.

This benchmark results in a nice yield of over 7%, while fees are like other MLP ETNs at 85 basis points a year. Exposure is also well diversified across the group, as no single company makes up more than 5.5% of the assets while all of the top fifteen have at least 3.4% of the assets (read Top Four High Yield Bond ETFs).

Still, investors should note that this is a much more small cap centric product with over half of the assets going to this cap level. Meanwhile, from an industry look, oil and gas pipelines account for about two-thirds of the assets, while exploration and oil refining, as well as a smattering of other sectors, receive 10% weightings each.

UBS ETRACS Alerian MLP Infrastructure ETN (MLPI - ETF report)

For a focus on the infrastructure corner of the MLP world, investors have MLPI, a relatively popular note from UBS. The product has amassed over $388 million in AUM and trades in volumes approaching 65,000 shares a day, tracking the Alerian MLP Infrastructure Index.

This benchmark consists of firms that generally earn the majority of their cash flow from the transportation and storage of energy commodities and is comprised of 25 stocks in total. Fees for this note also come in at 85 basis points a year, although the yield is rather robust at roughly 5.8% per annum (see 11 Great Dividend ETFs).

Investors should note that mid cap securities consist of half of the portfolio, with large caps (38%) comprising much of the rest of the product. In terms of individual holdings, no single company accounts for more than 10% of assets, while each security in the top ten makes up at least 4.4% of assets.

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