Each security undergoes a correlation analysis of its total returns to the price return of Brent Crude over a variety periods from the most recent three months to the last five years. Those securities with high positive correlation in the top 40% for all time periods analyzed are eligible for inclusion.
“We hope to redefine the way people look at energy,” Loftin added. “We know that the next generation of ETFs will be research-based.”
The indexing methodology is intended to diminish the effect of the “boom and bust” periods of commodity cycles and attempts to diminish drawdowns while preserving upside potential.
“The investment strategy behind BOON aims to provide a higher Sharpe ratio compared to traditional energy ETFs, the S&P 500, and ICE Brent Crude Oil, as well as commodity-oriented indices and investment
products,” according to Triline Index Solutions. The high Sharpe ratio refers to the more attractive risk-adjusted return of the strategy.
The portfolio is equally weighted. Top current holdings include Southern Copper 1.4%, Anadarko Pete 1.4%, PDC Energy 1.4%, Noble Energy 1.4% and WPX Energy 1.4%.
For more information on new fund products, visit our new ETFs category.