Why choose an active ETF
An increasing number of active exchange-traded funds (ETFs) are entering the marketplace, providing access to a variety of investment strategies. Investors are recognizing the advantages of this appealing investment structure. In fact, according to Morningstar, active ETFs took in roughly $190 billion in assets in the first nine months of 2024.1 YCharts reported flows into active ETFs accounted for almost a quarter of all ETF flows for the third quarter of 2024.2
Active ETFs can provide attractive benefits due to their structure and hands-on portfolio management:
- Access to focused sector expertise
- Expanded trading flexibility
- Lower trading and operating costs
- Greater tax efficiency
- Return potential beyond that of passive products
Taking advantage of the energy sector’s untapped opportunities
Global energy demand is at record levels and is projected to keep rising due to its essential role in daily life and economic growth. At Tortoise Capital, we invest in energy companies driving and benefitting from US production growth. We expect heightened reliance on electricity and natural gas as economies expand and energy needs grow, with energy security remaining a top priority for many countries. The U.S., as both a growing and the largest energy exporter, is well-positioned to further enhance global energy security.
Additionally, the U.S. boasts an extensive energy infrastructure network, transporting, storing and refining millions of barrels of oil and billions of cubic feet of natural gas daily. These infrastructure companies are crucial to not only the domestic economy, but to international well-being as well. Investment opportunities from the key role infrastructure plays arise due to the inherent traits of energy companies, including:
Playing key roles in national security
Generating and supplying more power for AI/data centers
Providing essential services necessary for our standard of living and economic growth
Maintaining high barriers to entry
Lacking sensitivity to economic volatility
Delivering consistent, steady cash flow
TPZ: Bridging the Gap in Energy Investing
Tortoise Electrification Infrastructure ETF (TPZ) is an active ETF that invests across the full energy landscape—including electricity, energy infrastructure, oil and gas producers, and renewable energy beneficiaries driven by the energy demands of emerging AI and data center facilities.
The approach is an active total return orientation that taps the total market, investing in a broader universe of over $3 trillion to set TPZ apart from traditional equity strategies. The universe enables TPZ to access a wider range of both of income and growth opportunities, improving investor alignment with the sector’s potential. The strategy’s flexible allocation is based on the market environment, which enables it to go offensive or defensive and is designed to capture strong upside capture while seeking income hedging in down markets.
Choose Tortoise Capital: Extensive Experience in Energy Investing
Tortoise Capital knows energy. Tortoise Capital is a resource for investors and the media on questions about energy. Our portfolio team’s experience includes over 20 years of dedicated energy investing, managing through multiple commodity price and economic cycles.
- With a long-only approach, the Tortoise Capital investment process is anchored on the search for yield, quality, and growth.
- We conduct comprehensive energy value chain analysis, focusing on bottom-up, fundamental analysis.
- Our security selection screens for stability and strategic advantage, and our portfolio construction consists of qualitative analysis, quantitative analysis, and relative value that relies on internal research.
- We identify mega-trends and evaluate energy technologies potentially impacting the energy sector.
Together, our deep industry expertise and unwavering investment process offer stability and enable the team to uncover high-quality opportunities and capture sector-specific growth that other ETFs may miss. Prioritizing strong, risk-adjusted returns, TPZ seeks to balance growth and downside risk over full market cycles.
Consistent Income Focus
TPZ is designed to deliver a steady monthly income stream. It is actively managed to capture the best income opportunities within the energy sector while its fixed income and covered call option overlays seek to boost income and pay dividends.
Flexible Allocation
Employing an active total return approach, TPZ pivots dynamically across bonds, master limited partnerships (MLPs), and equity securities as market conditions evolve, capturing total return opportunities that emphasize income and growth.
The securities that TPZ targets are varied.
- Energy stocks including MLPs generally offer higher dividends than other sectors due in part to the stability and fee-based nature of the underlying businesses.
- Preferred stocks pay high fixed dividends with stability and low volatility.
- High-yield bonds offer high income opportunity and the potential for appreciation in a favorable credit environment.
- Investment-grade bonds generally offer reliable, stable income and compelling yields with both low volatility and risk of default.
- Covered call writing could provide incremental current income while offering tactical opportunities to potentially exit stock securities.
The TPZ portfolio consists of compelling real asset energy securities across the energy value chain.
Expanded Fixed-Income Exposure
Seeking to enhance yield potential and support income objectives, TPZ includes a range of fixed-income investments, such as investment-grade bonds and high-yield bonds.
Our expertise on issuer creditworthiness provides an opportunity to add relative value by exploiting arbitrary pricing inefficiencies resulting from rating agency actions and the separation between high-yield and investment-grade bond buyers.
Where Is the TPZ Sweet Spot?
TPZ may be a good fit for income-focused investors who are looking for more than a traditional equity strategy, wish to gain exposure to the return potential of the energy sector, and value the advantages of the ETF structure.
By investing in high-quality companies and real assets across the energy spectrum, the energy sector experts at Tortoise Capital seek to deliver income, tax efficiency, and total return that exceeds benchmark performance while providing strategic diversification.
Important Information
Nothing in this article should be considered a solicitation to buy or an offer to sell any shares of the portfolio in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction. Nothing contained in this communication constitutes tax, legal or investment advice. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation.
Tortoise Capital Advisors, LLC (TCA) is the advisor to the Tortoise Electrification Infrastructure ETF.
The S&P 500® Index is an unmanaged, market-value weighted index of stocks that is widely regarded as the standard for measuring large-cap U.S. stock market performance. The S&P 500® Energy Index comprises those companies included in the S&P 500 that are classified as members of the GICS® energy sector. A master limited partnership (MLP) is a limited partnership investment vehicle that is traded on public exchanges. MLPs are traded in units rather than shares and consist of a general partner and limited partners. There are certain tax advantages as well as opportunity for more liquidity.
Before investing in the funds, investors should consider their investment goals, time horizons and risk tolerance. The funds’ investment objective, risks, charges and expenses must be considered carefully before investing. The statutory prospectuses and the summary prospectuses (click here) contain this and other important information about the funds. Copies of the funds’ prospectus may be obtained by calling 855-994-4437 or by emailing info@tortoisecapital.com. Read it carefully before investing.
The fund’s strategy of concentrating its assets in the power and energy infrastructure industries means that the performance of the fund will be closely tied to the performance of these particular market sectors.
Widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund’s investments. Investment advisers, including the Adviser, must rely in part on digital and network technologies (collectively “cyber networks”) to conduct their businesses.
Covered Call Option Risk: We cannot guarantee that our covered call option strategy will be effective. The use of options also may require us to sell portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation we can realize on an investment, or may cause us to hold a security we might otherwise sell.
Shares of exchange-traded funds (ETFs) are not individually redeemable and owners of the shares may acquire those shares from the ETF and tender those shares for redemption to the ETF in Creation Units only, see the ETF prospectus for additional information regarding Creation Units. Investors may purchase or sell ETF shares throughout the day through any brokerage account, which will result in typical brokerage commissions.
Investing involves risk. Principal loss is possible. The fund is registered as a non-diversified, open-end management investment company under the 1940 Act. Accordingly, there are no regulatory limits under the 1940 Act on the number or size of securities that we hold, and we may invest more assets in fewer issuers compared to a diversified fund. An investment in MLP securities involves some risks that differ from the risks involved in an investment in the common stock of a corporation, including risks relating to the ownership structure of MLPs, the risk that MLPs might lose their partnership status for tax purposes and the risk that MLPs will not make distributions to holders (including us) at anticipated levels or with the expected tax character.
We may invest a portion of our assets in fixed income securities rated “investment grade” by nationally recognized statistical rating organizations (“NRSROs”) or judged by our investment adviser, Tortoise Capital Advisors, L.L.C. (the “Adviser”), to be of comparable credit quality. Non-investment grade securities are rated Ba1 or lower by Moody’s, BB+ or lower by S&P or BB or lower by Fitch or, if unrated, are determined by our Adviser to be of comparable credit quality. Investments in the securities of non-U.S. issuers may involve risks not ordinarily associated with investments in securities and instruments of U.S. issuers, including different accounting, auditing and financial standards, less government supervision and regulation, additional tax withholding and taxes, difficulty enforcing rights in foreign countries, less publicly available information, difficulty effecting transactions, higher expenses, and exchange rate risk.
Restricted securities (including Rule 144A securities) are less liquid than freely tradable securities because of statutory and contractual restrictions on resale. This lack of liquidity creates special risks for us. Rule 144A provides an exemption from the registration requirements of the Securities Act of 1933 (the “1933 Act”), for the resale of certain restricted securities to qualified institutional buyers, such as the fund. We cannot guarantee that our covered call option strategy will be effective. There are several risks associated with transactions in options on securities. For example, the significant differences between the securities and options markets could result in an imperfect correlation between these markets. Certain securities may trade less frequently than those of larger companies that have larger market capitalizations.
There is no guarantee the fund will pay distributions in the future and distributions, if any, may be less than the current distribution.
Quasar Distributors, LLC, distributor.
Nothing on this website should be considered a solicitation to buy or an offer to sell any shares of the fund in any jurisdiction where the offer or solicitation would be unlawful under the securities laws of such jurisdiction.
Nothing contained in this communication constitutes tax, legal or investment advice. Investors must consult their tax advisor or legal counsel for advice and information concerning their particular situation.
NOT FDIC INSURED · NO BANK GUARANTEE · MAY LOSE VALUE