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T. Boone Pickens’ ETF to replace crude stocks with renewables

Oil tycoon T. Boone Pickens’ eponymous fund is swapping out one of its crude investment vehicles for renewables, seeing an opportunity in clean energy as fossil fuels get pummeled in the capital markets.

BP Capital Fund Advisors plans to revamp an oil-focused ETF with a shift to renewables in mid-August, according to a Friday filing. The underlying index was co-developed by BP Capital’s investment advisor and Morningstar, and is made up of North American companies that are “leaders in the transition to a low-carbon economy,” according to a regulatory filing.

“A guy that was a good old-fashioned wildcatter is now saying that solar and wind and geothermal and biomass, that we need to embrace it,” said Toby Loftin, the firm’s founder. “He’s been saying that for 11 years publicly, but this just puts the cherry on top.”

BP Capital, a spinoff of Pickens’ shuttered hedge fund, launched the oil ETF just last year, offering investors exposure to companies that benefited from a rise in global crude prices. Brent oil futures are down about 15% in the last year while BP Capital’s ETF (BOON) is down almost 20%.

Meanwhile, both the WilderHill Clean Energy Index is up 19% in the past 12 months and a Bloomberg Intelligence index of large solar companies is up 1.7%.

The revamped ETF, which will trade as RENW, is based on an index of companies that derive “significant revenue” from renewables or meet a large portion of their energy needs from renewable sources. BP Capital isn’t totally giving up on petroleum — the firm will continue to offer a pipeline ETF, for example.

Though Pickens rose to fame as a corporate raider in the 1970s and 1980s, he earned much of his wealth from bets on the direction of energy prices after turning 75 in 2003. This is not the first time Pickens, who indirectly controls BP Capital’s investment advisor, TriLine Index Solutions, has championed renewables: the 91-year-old unsuccessfully sought to build the world’s biggest wind farm in the Texas panhandle.

The average expense ratio among the leading 20 is nearly 40 basis points cheaper than what investors paid on average last year.
July 10

With crude supplies booming, demand “questionable” and electric vehicles ramping up, “do you have one last hurrah for oil prices or is it just never going to happen?” Loftin said. “I think that backdrop is going to always keep the energy space in general muted in terms of returns.”

Energy’s role in the S&P 500 has plunged to just over 5% now from almost 11% as recently as 2014.

“There’s a set of specific reasons why that’s the case, and it’s not going to go back to 13%, unless they can generate cash,” Loftin said. “The puck is heading toward renewables.” — Additional reporting by David Wethe, Joe Ryan and Rachel Evans

Bloomberg News