Today, Westwood Holdings launched its first ETF. The Westwood Salient Enhanced Midstream Income ETF (NYSE: MDST) aims to provide shareholders with current income and capital appreciation, according to its prospectus. A press release described the fund’s equity portfolio as “high conviction.”
The new ETF has an expense ratio of 0.80%.
MDST uses a fundamental approach to target the “midstream” portion of the energy sector. That segment includes firms involved in the gathering, transportation, and distribution of petroleum and other fossil fuels, the prospectus said.
The fund can invest in MLPs as well as companies with midstream operations. It can also implement covered calls on its equity holdings to further enhance its level or income. MDST uses a bottom-up method to evaluate and select securities for its portfolio, relying on its in-house models and analysis.
Aiming to Achieve Double-Digit Target
“Energy is an attractive sector that also serves as a fertile hunting ground for stocks and MLPs with high dividend yields,” said Westwood President of Real Assets and Portfolio Manager Greg Reid.
“By utilizing options, specifically covered calls, MDST looks to increase the portfolio dividend yield to achieve a double-digit target by capturing call option premium income. We expect to deliver all of this while maintaining some participation in equity upside on the portfolio,” he added.
The press release further noted in a statement from Westwood CEO Brian Casey that the firm will be building out its ETF business more in the future.
The largest MLP ETF is the Alerian MLP ETF (AMLP), with $8.5 billion in assets under management. However the fund is broadly focused on MLPs and tracks an index.
VettaFi LLC (“VettaFi”) is the index provider for AMLP, for which it receives an index licensing fee. However, AMLP is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of AMLP.
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