(Bloomberg) -- Cushing Asset Management has a lot riding on the meeting of OPEC in Vienna Thursday -- specifically, the success of its first exchange-traded funds.
On the heels of the worst month for crude since 2008, the Dallas-based investment firm, which manages about $3.3 billion in energy-related portfolios, is listing four sector ETFs connected to petroleum. The funds -- which focus on energy, utilities, transportation and the energy supply chain -- will look to deliver extra yield by investing some of their assets in companies set up as master limited partnerships.
It’s either terrible timing, or a stroke of genius. With oil having lost 22 percent in November and now trading at around $54 a barrel, OPEC could put a floor under the price by cutting its production. But with President Donald Trump pushing for lower prices, there’s a chance that exporters could let the price hold at this level, or slide even further.
“Calling a bottom is always rife with a challenge,” said Todd Sunderland, Cushing’s head of risk management and quant strategies. “If they do what I think most people expect with a reasonable cut, we do have a decent launching pad going into 2019 for energy and energy equities. But it’s a really difficult call.”
The funds won’t be cheap, carrying a fee of 0.65 percent, more than eight times the 0.08 percent charged by the least expensive energy ETF run by Fidelity Investments.
Cushing will allocate up to 24 percent of each fund’s assets to so-called MLPs, which operate primarily in the energy sector and tend to yield more than other equities. MLPs aren’t part of traditional indexed funds as their structure can necessitate laborious tax disclosures if they exceed 25 percent of a fund’s portfolio. Ironically, the master limited partnership model for oil and natural gas conduits has fallen out of favor this year, due in part to a tax change proposed in March that pummeled the companies’ unit prices.
The firm has previously provided MLP indexes to exchange-traded notes run by Morgan Stanley (NYSE:MS) and JPMorgan Chase & Co (NYSE:JPM).
The new funds are:
- Cushing Energy & MLP ETF (Ticker: XLEY)
- Cushing Utility & MLP ETF (Ticker: XLUY)
- Cushing Transportation & MLP ETF (Ticker: XLTY)
- Cushing Energy Supply Chain & MLP ETF (Ticker: XLSY)