Oil tycoon T. Boone Pickens’ eponymous fund is swapping out one of its crude investment vehicles for renewables, seeing an opportunity in clean energy as fossil fuels get pummeled in the capital markets.
BP Capital Fund Advisors LLC plans to revamp an oil-focused exchange-traded fund with a shift to renewables in mid-August, according to a Friday filing. The underlying index was co-developed by BP Capital’s investment adviser and Morningstar Inc., and is made up of North American companies that are “leaders in the transition to a low-carbon economy,” according to a regulatory filing.
“A guy that was a good old-fashioned wildcatter is now saying that solar and wind and geothermal and biomass, that we need to embrace it,” Toby Loftin, the firm’s founder, said in an interview in Houston. “He’s been saying that for 11 years publicly, but this just puts the cherry on top.”
BP Capital, a spinoff of Pickens’ shuttered hedge fund, launched the oil ETF just last year, offering investors exposure to companies that benefited from a rise in global crude prices. Brent oil futures are down about 15% in the last year while BP Capital’s ETF, which trades under the ticker BOON, is down almost 20%.
Meanwhile, both the WilderHill Clean Energy Index is up 19 per cent in the past 12 months and a Bloomberg Intelligence index of large solar companies is up 1.7 per cent.
The revamped ETF, which will trade as RENW, is based on an index of companies that derive “significant revenue” from renewables or meet a large portion of their energy needs from renewable sources. BP Capital isn’t totally giving up on petroleum -- the firm will continue to offer a pipeline ETF, for example.
Though Pickens rose to fame as a corporate raider in the 1970s and 1980s, he earned much of his wealth from bets on the direction of energy prices after turning 75 in 2003. This is not the first time Pickens, who indirectly controls BP Capital’s investment adviser, TriLine Index Solutions LLC, has championed renewables: the 91-year-old unsuccessfully sought to build the world’s biggest wind farm in the Texas panhandle.
With crude supplies booming, demand “questionable” and electric vehicles ramping up, “do you have one last hurrah for oil prices or is it just never going to happen?” Loftin said. “I think that backdrop is going to always keep the energy space in general muted in terms of returns.”
Energy’s role in the S&P 500 Index has plunged to just over five per cent now from almost 11 per cent as recently as 2014.
“There’s a set of specific reasons why that’s the case, and it’s not going to go back to 13%, unless they can generate cash,” Loftin said. “The puck is heading toward renewables.”
© 2019 Bloomberg L.P.