The ETF inspired by oil tycoon T. Boone Pickens – the NYSE Pickens Oil Response ETF (BOON US) – has been overhauled, ditching oil producers and intensive energy users in favour of clean energy renewables. It has also got a new name, ticker, and underlying index, as well as a reduction in its expense ratio.
Toby Loftin, Managing Member of Boone Pickens Capital Fund Advisors.
Launched in early 2018, the NYSE-listed fund previously tracked the NYSE Pickens Oil Response Index, a reference for US equities with a high correlation to changes in the price of ICE Brent Crude Oil.
But the ETF proved unsuccessful in piquing investors’ interest with assets under management currently sitting below $5 million.
In a bid to stoke demand, the fund is now targeting the renewable energy sector by way of the Morningstar North America Renewable Energy Index.
The new index covers companies operating across the North American renewable energy supply chain including innovators, suppliers, adopters, and end-users.
Its new name is the Pickens Morningstar Renewable Energy Response ETF (RENW US).
The new underlying index selects its constituents from the universe of US and Canadian stocks across the market cap spectrum.
The methodology picks stocks to form two distinct constituent groups. The first constitutes 75% of the total index weight and consists of companies with at least 5% of their revenues from renewable energy or at least 10% of their revenues from green transportation. The second group constitutes the remaining 25% of the index weight and includes companies that are leaders in meeting their primary energy requirements from renewables.
Renewable energy revenue and renewable energy usage are determined by data from Amsterdam-based ESG analytics firm Sustainalytics.
Constituents are equally weighted within each group, and sector weights are capped at 20% within the 25% sleeve. Reconstitution and rebalancing occur semi-annually.
Despite the dramatic change of direction, the fund’s sponsors assert that it remains true to the “Pickens Plan” objective of reducing America’s dependence on foreign sources of oil.
Toby Loftin, Managing Member of Boone Pickens Capital Fund Advisors, said, “We are pleased to work with Morningstar’s index team in connection with an ETF in the spirit of the Pickens Plan, which we believe gives investors more balanced exposure to renewable energy.
“The Pickens Morningstar Renewable Energy Response ETF includes not only renewable energy producers and green transportation companies, but also companies that are increasingly meeting their primary energy needs with renewable energy which we believe is a better representation of the fundamentals of the renewable energy value chain.
“Instead of investing in more narrowly-focused renewable energy funds, investors should take a more holistic approach, with the aim of achieving higher risk-adjusted returns across a more diversified base of companies. For more than a decade, Boone has been an advocate of the importance of renewable energy’s role in an energy plan for America. We believe renewable energy demand will grow dramatically in the years ahead, and RENW is a better way to invest in the theme.”
Sanjay Arya, Head of Indexes at Morningstar, added, “The shift toward renewable energy growth is here to stay, and the proportion of investors sensitive to environmental concerns continues to increase around the globe. With strong encouragement from governments, renewable energy represents an area of tremendous innovation. The Morningstar North America Renewable Energy Index that underlies this ETF stays true to the broader secular trend toward increased renewable energy adoption, while the index construction provides a more inclusionary view of the theme.”
The ETF’s expense ratio has been reduced from 0.85% to 0.65%.