TriLine Index Solutions, an affiliate of BP Capital Fund Advisors, has launched the NYSE Pickens Oil Response ETF (BOON US), whose name and ticker honours the leadership of American oilman T. Boone Pickens.
Oilman and corporate raider, T. Boone Pickens.
The fund tracks the NYSE Pickens Oil Response Index which selects stocks that have a high correlation to changes in the price of ICE Brent Crude Oil.
It aims to provide a higher Sharpe ratio compared to traditional energy ETFs, the S&P 500, and ICE Brent Crude Oil, as well as commodity-oriented indices.
Listed on NYSE, the ETF has been crafted in the same spirit as T. Boone Pickens’ plan for American energy. The so-called “Pickens Plan” aims to reduce America’s dependence on foreign sources of oil.
“We have spent considerable time developing this methodology and are humbled to bring it to the ETF marketplace as an extension of T. Boone Pickens’ legacy,” said Toby Loftin, managing principal at TriLine Index Solutions.
The modified, equally weighted index includes energy suppliers and producers, and also firms that are intensive end-users of energy. These end-users could potentially benefit from the abundance of US supply, as well as growing global demand for energy and their inclusion is intended to lessen the effect of the boom and bust nature of commodity cycles.
It is thought that this better reflects the realities of the new global energy markets in a post-shale era.
The index is constructed via a process that identifies those energy-related and energy-intensive stocks with strong, persistent correlation to ICE Brent Crude Oil. It excludes companies with a market cap under $2bn and less than $10m in average daily trading volume.
The index is rebalanced quarterly and reconstituted annually, and currently has 81 constituents.
Using back-tested data from December 2000, the index has delivered an annualised return of 10.7% and annualised volatility of 28.0%. Just over half (51.5%) of the total index exposure is in equities from the energy sector, followed by industrials (30.7%) and materials (12.7%).
“We are excited to work with the BP Capital team for the launch of BOON, a new ETF that leverages the performance of the NYSE Pickens Oil Response Index, one of ICE Data Indices’ proprietary index data products. This is the first time in our history that we are unveiling an index that honors an individual, in this case, T. Boone Pickens,” said Dwijen Gandhi, senior director in ICE Data Indices.
BOON offers a unique way to obtain exposure to the oil market, but this comes at a price. The fund’s expense ratio is 0.85% which makes it one of the more expensive ETFs in the market.