GraniteShares Acquiring Income ETF

Existing HIPS fund will be reorganized as a GraniteShares product.
Reviewed by: Staff
Edited by: Staff

GraniteShares has deviated from its initial focus on commodities and filed paperwork indicating it will take over the Master Income ETF (HIPS). The fund, which invests in pass-through securities offering high levels of income, launched in January 2015, but has not gathered signficant assets.

Although the filing does not give a specific date, the reorganization of HIPS is expected to be completed sometime in December, with the fund being renamed the GraniteShares US High Income ETF.

Unlike GraniteShares' other ETFs, HIPS is not a commodities fund and instead invests in a variety of securities with pass-through structures that require them to distribute their earnings to shareholders.

The fund’s underlying index, the TFMS US High Income Pass Through Securities Index, covers as many as 300 U.S.-listed high-income, pass-through securities (HIPS) falling into six different categories: closed-end funds targeting taxable, debt securities; mortgage REITs; commercial equity REITs; residential and diversified REITs; asset management and business development companies; and MLPs focused on energy production and transportation, according to the prospectus.

Index Construction

The index screens potential components for minimum levels of market capitalization and liquidity, as well as for sector-based minimum yield levels. Despite the minimum requirements for market capitalization, the index can include securities from any size segment.

The index is rebalanced quarterly and weighted by market capitalization, with each of the six security buckets limited to a total weight of 25%. Individual components are capped at a weight of 20% within their respective buckets, the prospectus said.

The filing did not include a new expense ratio or ticker for the fund, which currently costs 1.43%.

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