USCF Midstream Energy Income ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and an underweight in volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The management team invests alongside the strategy's shareholders, which helps it earn an Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like a favorable lineup success ratio, but is held back by below-average portfolio manager retention. This earns the firm an Average Parent Pillar rating.

Analyst Rating

ONEOK

Enbridge

Plains GP Hlds

Targa Resources

Affiliated Managers

Equitrans Midstream

Williams

Cheniere Energy

Kinder Morgan

DT Midstream

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. USCF Midstream Energy Income Fund earns a High Process Pillar rating. 

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 100%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's excellent risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 4.0 stars, also contributes to the process. An adequate team size further supports the process, with more than one manager at the helm.

 This strategy targets larger plays than its peers’ average in the Energy Limited Partnership Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Analyzing additional factors, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to suffer from a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward low-volatility stocks in recent years, meaning companies with a lower historical standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, the portfolio has tended to underweight yield, as shown in its lower exposure to companies that pay dividends or buy back shares than peers over these years. Returning capital to shareholders often is not the highest priority of such businesses. The shares of such companies can deliver strong returns if they fulfill their growth projections, but they also carry more risk. In recent months, the strategy also had less Yield factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in energy by 6.0 percentage points in terms of assets compared with the category average, and its technology allocation is similar to the category. The sectors with low exposure compared to category peers are utilities and basic materials, with utilities underweighting the average portfolio by 5.3 percentage points of assets and basic materials similar to the average. The portfolio is composed of 25 holdings and is quite concentrated. Specifically, 64.8% of the portfolio's assets are housed within the top 10 holdings, as opposed to the category average of 61.7%. And finally, in terms of portfolio turnover, on a year-over-year basis, 17% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

USCF Midstream Energy Income Fund earns an Average People Pillar rating. The primary contributor to the rating is its parent firm's impressive long-term risk-adjusted performance, as shown by the firm's average ten-year Morningstar Rating of 4.0 stars. A low cost, with fees that rank in its category's cheapest quintile, also strengthens the rating. Fees detract from net returns, so the team has a lower expense hurdle to overcome. Lastly, the rating is limited by the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of three years suggests it could do more to retain portfolio managers.


Gregory L. Powell, the longest-tenured manager on the strategy, provides strong guidance, offering 16 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.5 stars, reflecting below-average risk-adjusted performance versus category peers. Although the team is small, it is a solid supporting cast. Together, the three listed managers boast more than an average of 11 years of listed portfolio management experience. The highest personal investment in the fund by any of its managers is between $100,000 and $500,000. That's on the low side--it would need to be more than $1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors.

Average

People

In a competitive industry, USCF doesn't differentiate itself enough, leading to an Average Parent Pillar rating. Even with an average pillar rating, USCF has had impressive longevity among its product shelf. The firm's risk-adjusted success ratio is 100%, meaning that 100% of its strategies have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. USCF has had higher portfolio management turnover than peer firms in the past five years. Turnover in the portfolio-management ranks can happen for a number of reasons, including fund mergers and liquidations, portfolio managers moving into other roles, or portfolio managers leaving the firm. In some cases, such change may not signal a serious or immediate problem at the firm, but can still be disruptive for fundholders, hinder the effectiveness of a firm’s investment processes, or suggest a weaker investment culture. A notable weakness of USCF is the inexperience of its longest-tenured managers compared with other asset managers. Managing capital through a full market cycle is a challenging prospect for seasoned managers, but with only two years of average tenure across their management team, there is cause for concern.

Parent

USC Midstream Energy Income Fund

UMI holds an actively-managed portfolio of midstream energy infrastructure companies. The fund is income-focused and uses a fundamental approach that integrates ESG research.

The USCF Midstream Energy Income Fund ETF is a concentrated sector fund focused on energy midstream companies with low portfolio turnover. The USCF Midstream Energy Income Fund ETF has delivered decent performance, returning 14.6% in 2023. However, despite strong short-term returns, the UMI ETF has continued to underperform passive ETFs in the midstream energy space and has lower distribution yields.

Despite Decent 2023 Returns, UMI Continues To Lag Passive ETFs

USCF Midstream Energy Income Fund ETF is an active exchange-traded fund focused on energy infrastructure companies. In the fund's short operating history, it has significantly underperformed passive ETFs such as the AMLP, both in terms of returns and distributions.

UMI: Active Strategy Focused On Energy Infrastructure Underperforms Passive ETF

USCF Midstream Energy Income Fund tracks American midstream energy companies. UMI is a fairly new fund, trading since March of 2021.

UMI: Sometimes It's Good To Be In The Middle

UMI is a midstream energy infrastructure ETF. It has outperformed several competitor ETFs.

UMI: Midstream Energy Fund With NGL Tilt Outperforms

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In a stubbornly low interest-rate environment, investors are seeking out alternative avenues to generate extra yield. Midstream energy companies and master limited partnerships are two of the more credible asset classes in this arena.

Midstream Marvels: An ETF Strategy for the Low-Rate Landscape

On Wednesday, USCF today announced the launch of the USCF Midstream Energy Income Fund (UMI) with sub-adviser Miller/Howard Investments, a Woodstock, NY-based, research-driven portfolio management firm. UMI, an actively-managed ETF, will apply Miller/Howard's hallmark bottom-up fundamental research to midstream energy infrastructure companies focused on energy transportation, storage, and gathering/processing.

News for USC Midstream Energy Income Fund ETF (UMI)