A fund named for Texas oilman T. Boone Pickens will swap its strategy, embracing renewable energy stocks in a sign of the times for fossil fuels.
An exchange-traded fund named for Texas oilman T. Boone Pickens will swap its strategy, embracing renewable energy stocks in a sign of the times for fossil fuels. But while renewables may seem more cutting-edge than oil, that doesn’t necessarily mean investors should automatically gravitate to the new venture.
But sometimes a swap is a lot more disruptive, like in late 2017, when a Latin America real estate ETF suddenly decided to invest in marijuana instead. For some investors, an “about-face” like the one adopted by BOON’s investment advisers might be just as jarring, Johnson noted.Unfortunately, investors have little say in it, he told MarketWatch, not unlike when an actively-managed mutual fund or ETF swaps managers and the new staff brings fresh ideas.
This transition at least offers investors options. If the fund shut down altogether, it would likely leave investors with a pile of cash and unexpected tax bills, Johnson noted. That happens more often than you might expect — the ETF “mortality” rate is close to 30%, he said.As for the new venture, RENW, Johnson advises some soul-searching for anyone interested in the approach.
And the analysis shouldn’t end there. “It’s important to understand that you’re making, a very complicated multi-part bet with these niche firms. Part of the bet is, is this theme legitimate? Is it durable? The second part is,can this fund provide me high fidelity exposure to firms that derive the majority of their revenues from this theme?”
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