For years, energy investing has been seen through a narrow lens, primarily defined by oil prices and the volatile performance of upstream producers. Advisors seeking exposure to the sector often defaulted to passive ETFs like XLE or AMLP, assuming these vehicles provided adequate representation of the energy market. But the sector has evolved. Dramatically.
Currently, energy investing requires a broader and more modern perspective. A perspective that not only captures the sector’s newfound complexity but also its growing relevance in today’s portfolio construction strategies. If you haven’t reexamined how energy fits into your clients’ portfolios lately, now is the time.
The Traditional Energy Playbook Is Outdated
Historically, energy exposure has been closely tied to crude oil prices and the equity performance of exploration and production (E&P) companies. Strategies that worked in the 2000s, such as buying the dip on oil majors or overweighting upstream names when crude prices spiked, often relied on speculation and beta-driven returns.
Popular ETFs, such as the Energy Select Sector SPDR Fund (XLE) and, to a lesser extent, the Alerian MLP ETF (AMLP), reflect older models. Their holdings remain heavily concentrated in a small number of large-cap names and midstream partnerships. While they’ve offered strong returns in select market environments, they often lack proper diversification and can carry high volatility relative to broader equities.
Worse, many advisors still view the energy sector as inherently cyclical, volatile, and narrowly focused. That perception is increasingly out of alignment with today’s reality.
Today’s Energy Sector Is Broader and More Investable
The energy sector of 2025 is not the same one that advisors studied a decade ago. It’s a modern ecosystem defined by infrastructure, diversification, and global relevance.
Consider the rise of liquefied natural gas (LNG) terminals and natural gas liquids (NGLs). These subsectors now play key roles in global energy supply chains. The U.S. has emerged as a global leader, not just in crude oil, but in natural gas exports, pipeline networks, and multi-fuel infrastructure. This shift has also been fueled by larger structural drivers:
- Data center growth is pushing electricity demand to new highs.
- The electrification of transportation and buildings is reshaping utility and infrastructure needs.
- Energy security has returned as a core geopolitical concern, with the U.S. playing a central role.
- Global GDP growth, especially in emerging markets, continues to elevate baseline energy demand across all fuel types.
At the same time, nuclear power and renewables are growing into complementary roles, supported by new investments in energy storage, smart grids, and hybrid infrastructure platforms. These dynamics aren’t cyclical; they’re structural, and they make the energy sector more investable than ever.
Income and Risk Management Are Now Front and Center
In past cycles, energy investing was often viewed as riding boom-and-bust cycles. Today, it’s increasingly about finding consistent income and risk-managed exposure.
Many modern energy businesses, particularly in the midstream and infrastructure segments, operate under long-term, fee-based contracts. These models can deliver stable cash flows that are largely independent of commodity price volatility. As a result, they function more like real assets than traditional equities, making them suitable for consideration in income-oriented portfolios. Advisors also have new tools to improve client outcomes within the energy allocation:
- Energy-related credit and preferreds can enhance fixed income sleeves.
- Covered call strategies can generate incremental yield from equity positions.
- Hybrid funds that allocate across both equities and debt enable more agile responses to changing macroeconomic conditions.
Why Many Portfolios Remain Underexposed
Despite this evolution, energy still represents a surprisingly small slice of most portfolios. Energy and utilities combined make up just 5.5% of the S&P 5001, an underweight that’s often reflected in passive portfolio strategies.
Compounding this issue, many popular ETFs exclude key components of the energy value chain, such as the aforementioned export and electrification infrastructure. Advisors relying on these instruments may be inadvertently limiting their exposure to energy’s most durable and attractive segments. That underexposure also represents a missed opportunity. Energy investing today is aligned with several key portfolio construction themes:
- Inflation hedging, via real asset exposure
- Sector rotation, as growth and tech valuations compress
- Global macro alignment, through exposure to international demand and U.S. energy leadership
Advisors who proactively reassess their energy allocations can position clients to benefit from a sector undergoing secular change.
Tortoise’s TNGY: A Broader, Modern Approach to Energy Investing
Recognizing the limitations of legacy energy strategies, Tortoise created the Tortoise Energy Fund (TNGY), an actively managed ETF designed to reflect the full energy value chain.
TNGY offers:
- Broad flexibility, investing across energy sectors including infrastructure, utilities, renewables, and asset classes (including fixed income up to 50%)
- Potential income generation, via high-dividend equities and yield-enhancing option strategies
- Tax efficiency, to support after-tax outcomes for income-focused investors
- Real asset exposure, offering potential protection against inflation and volatility
Most importantly, TNGY is built by a team with decades of experience designing energy investment strategies. Tortoise’s deep understanding of sector dynamics gives the fund agility to respond to both macroeconomic conditions and micro-level developments across energy subsectors.
Reassess Energy as a Modern Core Allocation
For investment advisors, energy no longer needs to be relegated to a cyclical, tactical sleeve. It can be a strategic allocation grounded in income, diversification, and real asset exposure.
You now have an opportunity to lead client conversations with fresh insight. If you haven’t reviewed how energy fits into your client portfolios lately, this is the time. A broader, more intentional allocation may not only enhance portfolio diversification but also demonstrate your ability to guide clients through the structural shifts shaping today’s economy.
Important Information
Tortoise Capital Advisors, LLC. (TCA) is the adviser to the Tortoise Energy Fund. TCA is an investment manager specializing in listed energy investments and is experienced in managing portfolios of MLP securities and other energy companies for individual, institutional and closed-end fund investors.
The fund’s investment objective, risks, charges and expenses must be considered carefully before investing. The summary and statutory prospectus contains this and other important information about the fund and may be obtained by calling (855) 994-4437 or visiting etp.tortoisecapital.com/funds/tortoise-essential-energy-fund. Read it carefully before investing.
Additional Comparison Considerations
Investment objectives and strategies will vary greatly among individual ETFs. Before making an investment decision, it’s important to check the fund’s prospectus or offering memorandum for factors such as investment objectives, costs and expenses, liquidity, fluctuation of principal or return, and tax features. All investments contain risk and may lose value. References to comparison funds are for illustrative purposes only and are not intended as recommendations to buy or sell any securities. To obtain a prospectus containing important fund information for the products referenced, please view/download a prospectus here: XLE, VDE, AMLP.
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. The S&P 500® Index is an unmanaged market-value weighted index of stocks, which is widely regarded as the standard for measuring large-cap U.S. stock market performance. Returns include reinvested dividends. 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. Active share is a measure of the percentage of stock holdings in a manager’s portfolio that differs from the benchmark index.
Risks include, but are not limited to, risks associated with companies owning and/or operating energy pipelines, as well as master limited partnerships (MLPs), MLP affiliates, capital markets, terrorism, natural disasters, climate change, operating, regulatory, environmental, supply and demand, and price volatility risks. The tax benefits received by an investor investing in the fund differ from that of a direct investment in an MLP by an investor. The value of the fund’s investment in an MLP will depend largely on the MLP’s treatment as a partnership for U.S. federal income tax purposes. If the MLP is deemed to be a corporation then its income would be subject to federal taxation, reducing the amount of cash available for distribution to the fund which could result in a reduction of the fund’s value. Investments in non-U.S. companies (including Canadian issuers) involve risk not ordinarily associated with investments in securities and instruments of U.S. issuers, including risks related to political, social and economic developments abroad, differences between U.S. and foreign regulatory and accounting requirements, tax risk and market practices, as well as fluctuations in foreign currencies. The fund invests in small and mid-cap companies, which involve additional risks such as limited liquidity and greater volatility than larger companies. Shares may trade at prices different than net asset value per share. 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.
Diversification does not assure a profit or protect against a loss in a declining market.
Nothing on this brochure 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.
TNGY is distributed by Quasar Distributors, LLC which is not affiliated with any other products discussed.
• NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE