Many MLPs own attractive, fee-generating assets in the pipeline business. These MLPs have shined in recent years because their cash flows aren’t sensitive to commodity prices. Most of these MLPs enjoyed relatively easy access to credit markets while other businesses struggled to access cash during the global economic crisis.

Rather than issuing a Form 1099 detailing dividend payments at tax time, MLP distributions are reported via a K-1, a packet of information that many investors find daunting. Partnerships can also generate unrelated business taxable income (UBTI), which poses challenges if you hold large MLP positions in a tax-advantaged account.

One way to steer clear of these issues is to hold a fund that focuses on MLPs, of which there are a growing number. The space is becoming increasingly competitive. Six funds are already dedicated to MLPs and, according to filings with the Securities and Exchange Commission, a handful more will launch this year as the MLP market is further sliced and diced by issuers.

Our favorite MLP-focused exchange-traded product is JP Morgan Alerian MLP Index ETN (NYSE: AMJ), which has been on the market for two years. This exchange-traded note (ETN) tracks the Alerian MLP Index, a capitalization-weighted index made up of the 50 largest publicly traded midstream energy MLPs.

As midstream players, these partnerships are insulated against the commodity-price swings that affect exploration and production MLPs; they’re paid based on contract rates for the volume of oil and natural gas moving through their pipelines. With extremely predictable revenue streams and payouts, these MLPs are wildly popular among individual investors. Furthermore, they represent an easy way to gain exposure to growing energy demand while tamping down some of the volatility that is common to the sector.

Although we’re not adding JP Morgan Alerian MLP Index ETN to our Income & Hedges Portfolio, income-oriented investors can boost their portfolio’s yield if they buy the ETN under 40.