Westwood launches US energy ETF aiming to deliver 10% yield

Westwood Holdings

09/04/2024 13:00

By Suzanne McGee
       April 9 (Reuters) - Westwood Holdings Group  WHG.N 
Tuesday launched its first exchange-traded fund (ETF), a vehicle
combining investments in energy infrastructure businesses with
an option overlay strategy.  
    The Westwood Salient Enhanced Midstream Income ETF  MDST.N 
aims to deliver a yield of 10% or more through dividend income
from midstream energy stocks and income from selling
out-of-the-money call options on individual stocks, said Greg
Reid, the fund's portfolio manager.
    The new fund is the latest entrant in a category that has
become increasingly popular in recent years. Many issuers have
been eager to capitalize on the runaway success of the JPMorgan
Equity Premium Income ETF  JEPI.P . That fund's assets stand at
$33 billion and it attracted inflows of more than $13 billion in
2023 alone, according to Morningstar.
    "Covered call funds have been one of the key ETF market
trends in the last few years, and has been one of the largest
forces attracting assets in the last year," said Todd
Rosenbluth, head of ETF strategy at VettaFi. 
    After five years of considering an ETF launch, "the
explosion of interest in covered call option ETFs" accelerated
plans, Reid said.
    Energy infrastructure holdings have outperformed the broader
energy complex over the last 12 months. The Alerian Midstream
Energy Index, which has holdings in Enbridge Inc  ENB.TO  and
Cheniere Energy Ltd  LNG.N , is up 15% in that period, while the
Dow Jones U.S. Oil & Gas Index has gained 13.1%. 
    Dallas-based Westwood has $16 billion in assets under
management in mutual funds and separate accounts. Reid said that
some of its clients currently are investors in a similar
strategy in separate accounts and likely will move their
holdings to the ETF as a more liquid and tax-efficient
alternative.
    
    

 (Reporting by Suzanne McGee; Editing by Ira Iosebashvili and
Stephen Coates)
 ((Suzanne.McGee@thomsonreuters.com; 917-285-4385;))