By Brendan Conway

When it comes to the yield-rich corner of the energy sector called master-limited partnerships, owning a fund instead of individual MLPs can relieve you of some serious tax headaches. But the fund structures themselves bear some scrutiny, too.

Ned Davis Researchs Neil Leeson takes a look this week and finds reason to gravitate toward exchange-traded notes instead of exchange-traded funds. You see the reason in the significant gap in returns between the most popular of each type. The blue line surging to the top is the $5.9 billion JPMorgan Alerian MLP exchange-traded note  (AMJ ), up 23% YTD, while yellow is the S&P 500 (SPY ), which has risen 16%. The orange line is the $6.2 billion Alerian MLP ETF (AMLP ), ahead by 14%:

Why the big difference? Its less the fact that the ETN and the ETF track slightly different indexes than the ETNs advantage when it comes to taxes. As Leeson notes, since MLPs are structured as C corporations, the ETF is pulling a deferred tax liability out of the returns every day. This is reflected in the massive-looking expense ratio, which consists of a 0.85% management fee plus 4% in other expenses.

The ETN, by contrast, is merely mimicking the index: An ETN (unlike an ETF) doesnt have to hold the securities it tracks.

But wait, theres still another wrinkle. You might be safer going to a competitor of the JPMorgan ETN if the above performance difference which seems to be a persistent feature convinces you. Provided you trade in small size.

As Leeson notes, the JPMorgan ETN is not issuing new shares, which means the price has traded to premium versus the index. Here is the YTD chart of this premium, expressed as AMJs price versus its intraday indicative value:

UBS AGs $61 million ETRACS Alerian MLP Index ETN (AMU ), not quite a year old, offers the ETNs tax advantages without the oddity of the share-creation cutoff.

If these options still dont float your boat, there are mutual funds and closed-end funds to choose from, too. Some use leverage. Kayne Anderson MLP (KYN ) has beat all the above funds this year with a 27% gain. The same is true of Tortoise Energy Infrastructure (TYG ), 25%, and Kayne Anderson Energy Total Return (KYE ), 24%.

Ned Davis Leeson and colleagues, though, are looking for a 10%-15% correction in the high-performing sector before diving in.

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