Market Overview

A Closer Look At The New Clean Energy ETF

A Closer Look At The New Clean Energy ETF

The NYSE Pickens Oil Response ETF, the once scuffling energy exchange traded fund that was built by Boone Pickens Capital Fund Advisors, the investing firm founded by the legendary oilman, is no longer. As was previously reported, the ETF once known by the ticker “BOON,” is converting to an alternative energy fund.

What Happened

That conversion was completed Wednesday with the debut of the Pickens Morningstar Renewable Energy Response ETF (NYSE: RENW). RENW targets the Morningstar North America Renewable Energy Index.

That benchmark is designed “to provide exposure to companies that operate across the full renewable energy supply chain, including renewable energy innovators, suppliers, adopters, and end users,” according to a statement issued by Dallas-based TriLine Index Solutions, the index and ETF unit of BP Capital.

Why It's Important

While no sector has been spared the broader market's recent carnage, RENW debuts at a time when alternative energy stocks and ETFs have been outpacing their traditional energy rivals and as the weight of the energy sector dwindles in the S&P 500. As of Aug. 13, energy stocks account for just 4.54% of the S&P 500, less than half the sector's weight just a few years ago.

“RENW seeks to mitigate the downside and capture the upside of renewable energy cycles by investing in producers and consumers of renewable energy, in contrast to more narrowly focused renewable energy funds,” according to TriLine.

The new RENW has 82 holdings, 46% of which hail from the utilities sector, according to issuer data. Industrial and technology stocks combine for 27% of the new ETF's weight. Familiar names on RENW's roster include Tesla Inc. (NASDAQ: TSLA), Walmart (NYSE: WMT), Edison International (NYSE: EIX) and SunRun (NYSE: RUN).

RENW is designed to be a more encompassing alternative energy fund than rival ETFs that focus on just one theme, such as solar or wind energy.

What's Next

Declining costs and increased adoption are among the factors contributing to the renewable energy industry's stout growth trajectory and that growth is expected to continue.

“The share of renewables in meeting global energy demand is expected to grow by one-fifth in the next five years to reach 12.4% in 2023,” according to TriLine.

RENW charges 0.65% per year, or $65 on a $10,000 investment.

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