Another Boone Pickens Fund Launches

Today UBS rolled out another addition to its family of ETRACS ETNs, this one tracking an index that evokes the name of financier T. Boone Pickens. The ETRACS NYSE Pickens Core Midstream Index ETN (PYPE) focuses on companies that fall within the gathering and processing, liquefaction, pipeline transportation, rail terminaling and storage industries in FactSet’s business classification system.

PYPE lists on the NYSE Arca and comes with an expense ratio of 0.85%.

The index can include the securities of companies structured as corporations as well as those structured as MLPs. Eligible firms must generate more than half of their operating income from business activities related to midstream energy processes.

Eligible companies must be domiciled in the U.S. as well as generating their revenue domestically; they also must meet minimum liquidity and have a free-float market capitalization of at least $500 million. Finally, they must have a current dividend yield that matches or exceeds that of the SPDR S&P 500 ETF Trust (SPY), the prospectus says.

Index Targets

The index targets “core midstream” companies, excluding refiners but including companies involved in refining logistics. Companies primarily involved in retail propane marketing are excluded, as are those primarily involved in compression. Utility companies are also excluded from the index, according to the document.

The companies that remain are ranked by market capitalization, with the top 30 selected for the index and weighted by market cap, subject to a cap of 7.5%. The index is rebalanced and reconstituted quarterly.

Interestingly, T. Boone Pickens’ full name is not mentioned in the prospectus. He also recently lent his name to the NYSE Pickens Oil Response ETF (BOON), which covers U.S. stocks that have a high correlation with the price of Brent crude oil. BOON, launched in the first quarter, currently has $6.4 million in assets under management.

Contact Heather Bell at [email protected]