Tortoise Index Solutions, part of the Tortoise family, begun trading a new Water ETF, the Tortoise Water Fund (Bats: TBLU), on Wednesday, February 15, 2017. Here is a synopsis of the new ETF:
|Symbol: TBLU||Exchange: BATS|
|Name: Tortoise Water Fund||Net Expense Ratio: 0.40%|
The Tortoise Water Fund seeks investment results that correspond (before fees and expenses) generally to the price and distribution rate (total return) performance of the Tortoise Water Index.
The Tortoise Water Index is a proprietary rules-based, modified capitalization weighted, float adjusted index designed to track the overall performance of equity securities of Water Companies listed on the New York Stock Exchange, NASDAQ, or Toronto Stock Exchange.
A Water Company is defined as a company that derives significant gross revenues from either water infrastructure or water management. Water infrastructure companies are those whose principal business is providing public water distribution or supporting/enhancing water distribution infrastructure via equipment, engineering and/or consulting. Water management companies provide technologies or products that manage or facilitate the management of water distribution and usage, including the fields of water efficiency, water treatment, and irrigation.
To be included in the Underlying Index, a company must be a Water Company that is listed on the New York Stock Exchange, NASDAQ, or Toronto Stock Exchange. The Underlying Index may include small and medium capitalization companies. Eligible constituents must also have a total float adjusted equity market capitalization of at least $200 million USD at the time of inclusion in the Underlying Index. In order to remain in the Underlying Index, a company must maintain an average float adjusted equity market capitalization of at least $150 million USD for a minimum of 20 trading days prior to the rebalance of the Underlying Index.
Many companies that are engaged in the water industry also derive substantial revenues from non-water related activities. Some such companies, including some in the Underlying Index, derive less than half of overall company revenues from water industry activities. In some instances, these companies may have market caps that are substantial relative to the size of the industry. While Tortoise Index Solutions, LLC (Adviser) believes including such companies in the Underlying Index is important, equally important is the Adviser’s prerequisite that the Underlying Index derives a significant portion of its revenue from water related activities.
In an effort to create an index that does both, the Adviser has implemented a “revenue weighting” methodology. Revenues from all potential index companies are collected annually from company 10-Ks or equivalents. The inclusion criteria is then applied. Water Companies are divided into 2 segments. Those companies with at least 50% of their gross revenues derived from water related activities comprise the “direct water exposure” segment (direct segment). The direct segment will be weighted to represent a minimum of 70% of the total float adjusted market cap of the Underlying Index. Water Companies that derive significant, but less than a majority of, gross revenues from water related activities will comprise the “indirect water exposure” segment (indirect segment).
Initially, the indirect segment will be weighted to represent a maximum of 30% of the total float adjusted market cap of the Underlying Index. Constituents in the indirect segment will be equally weighted and no security in this segment will have a weight higher than 4% of the float adjusted aggregate market cap of the Underlying Index. It is possible, therefore, that the resulting sum of weights in the indirect segment is less than 30% due to the 4% limitation on individual securities.
In that event, the excess available market cap will be redistributed to the direct segment. For the Underlying Index as a whole, no individual security may be more than 7.5% of the total float adjusted market cap of the Underlying Index.
As of the December 16, 2016 rebalance, the Underlying Index was comprised of 34 constituents.
Index Top Holdings (12/16/16):
|Aqua America Inc.||7.7%|
|American Water Works Co., Inc.||7.6%|
|A.O. Smith Corporation||7.3%|
|Cia de Saneamento Basico||6.0%|
|Mueller Water Products, Inc.||4.6%|
|Watts Water Technologies, Inc.||4.0%|
|American States Water Company||3.5%|
|California Water Service Group||3.5%|
|Franklin Electric Co., Inc.||3.3%|
TBLU Home Page
Here is a comment from Jeremy Goff, Tortoise director:
“Water is critical for economic growth and social stability. We believe that there is a tremendous need in the market for a quality index that accurately represents the water industry. Creating this product is a natural extension of our strategy to provide essential asset solutions in wrappers that are desired by advisors and investors.”
TBLU is the 2nd ETF offering from Tortoise Index Solutions. Its first offering, Tortoise North American Pipeline Fund (TPYP), provides access to the sizable pipeline network of one of the world’s largest consumers of energy.