An Oil ETF To Invest Like T. Boone Pickens

Audio length: 00:19:08

In this episode of ETF Spotlight, I talked with Toby Loftin, portfolio manager at BP Capital Fund Advisors, and founder of the NYSE Pickens Oil Response ETF (BOON - Free Report) .

First off, we discussed oil prices. Last month, crude prices had soared to their highest levels since 2014 but have plunged since then on reports that OPEC and Russia are set to increase production.

Toby doesn’t see this as the end of oil rally. Please listen to the podcast for more.

The ETF is named after legendary oil investor T. Boone Pickens. Toby explained how the ETF reflects Boone’s investment philosophy for profiting from the US energy revolution.

Unlike most energy ETFs, BOON assumes a more comprehensive view of energy investing. Instead of limiting its exposure to traditional oil companies, it includes all companies with significant correlation to oil prices.

We discussed why this approach was needed and how investors can benefit by investing in companies that both produce and consume oil.

While suppliers benefit from higher oil prices, end users thrive when prices fall. The ETF thus aims to provide better risk-adjusted returns compared to other energy ETFs over the long-term.

The ETF portfolio is determined by a committee of experts. Toby explained how companies are selected. They are weighted equally in the ETF.

BOON’s expense ratio is 85 basis points whereas traditional energy ETFs charge much lower fees. Toby explained why.

Finally, Toby highlighted that while the ETF is new and small, investors should not worry about its liquidity, as the underlying holdings are extremely liquid.

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