GraniteShares acquires Master Income ETF; lowers fees

Dec 20th, 2017 | By | Category: Alternatives / Multi-Asset

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US-based ETF provider GraniteShares has acquired the Master Income ETF (HIPS US) and rebranded it as the HIPS US High Income ETF. The fund invests in pass-through securities offering high levels of income.

GraniteShares acquires Master Income ETF; lowers fees

HIPS provides a high level of income by investing in pass-through securities such as MLPs, REITs and CEFs.

The ETF seeks to deliver high yield to investors without concentration risk in any one sector by tracking the TFMS HIPS 300 Index. Securities that are eligible for investment by the fund include master-limited partnerships (MLPs), real estate investment trusts (REITs), and closed-end funds (CEFs).

Energy MLPs are defined as those owning energy infrastructure in the United States, including pipelines, natural gas, gasoline, oil, storage, terminals, and processing plants. MLPs profit from the quantity of oil and natural gas they are able to move around and typically pay out the majority of operating cash to investors on a quarterly basis.

REITs are companies that own, operate, or finance income-producing real estate. For a company to qualify as a REIT, it must meet certain regulatory guidelines including distributing the majority of its income, about 90% of taxable profits, to investors as dividends.

CEFs are collective investment models based on issuing a fixed number of shares which are not redeemable from the fund. These listed investment vehicles often trade at a premium or discount to NAV as a result of market technicals and sentiment.

The underlying strategy marks a deviation away from GraniteShares’ traditional investment focus, which has revolved solely around low-cost commodity funds since the provider debuted its first ETFs in May this year. However, like most of its sister products on the GraniteShares platform, there is no K-1 associated with HIPS.

Although HIPS has struggled to gain significant assets since its launch, the acquisition is occurring just weeks before the fund hits the crucial three-year trading mark. The fund could soon begin to obtain interest from investors whose mandates require a minimum three-year performance history when selecting investments.

“HIPS is an important acquisition for the firm as it seeks to serve as the benchmark for high income pass-through securities and has historically been one of the highest yielding ETFs in the market,” said GraniteShares CEO Will Rhind. “This fund looks to mitigate sector risk associated with portfolio overconcentration, something often found with MLP investments. With its diversity, liquidity and yield, HIPS furthers our mission of providing good ideas to investors in the form of ETFs.”

Also likely to help drum up increased interest in HIPS, GraniteShares has slashed the ETF’s management fee from 1.43% to 0.70%.

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