The podcast episode of "Behind the Ticker" featuring Greg Reid, the president of Real Assets at Westwood, offers a detailed insight into his background, the firm’s operations, and the innovative strategies they employ. Greg Reid has a lengthy career in investment, dating back to 1987, and currently manages a team in Houston overseeing $2.3 billion in assets. Westwood, a public company based in Dallas, focuses on real asset management, particularly in the energy sector, with a strong emphasis on value equities and income-generating real assets.In the episode, Reid discusses the launch of Westwood’s new ETF, the Westwood Enhanced Midstream Income ETF (MDST), which is particularly innovative due to its use of covered calls to enhance yield. This strategy aims to offer investors double-digit dividend yields by combining high-yielding stocks with covered call writing, which provides additional income and reduces portfolio risk.Reid also elaborates on the construction of MDST’s portfolio, which selects stocks based on dividend yield and growth potential, aiming to optimize returns and manage risk. The fund’s strategy involves a rigorous selection process, leveraging in-house research to identify the best-performing stocks within the energy sector, focusing on midstream companies.Marketing strategies for the ETF target high-net-worth individuals and RIAs, positioning it as an attractive option for those seeking income solutions within their investment portfolios. Reid’s approach underlines the importance of combining sophisticated financial instruments with strategic marketing to appeal to a broad audience, highlighting the balance between innovative financial products and practical investment solutions for retirement and income-focused portfolios.
Deeper Dive: Insights from the Full Conversation
Beyond the headline strategy, the full conversation between Brad and Greg Reid covered several additional themes worth highlighting for advisors and investors.
On Process and Philosophy
And I'll mention our existing mutual fund because it's a starting place. You know, it's, it's now 12 years old. We've been doing this a long time. SMLPX is our existing mutual fund. It's $968 million of assets today. And they're where we use the same benchmark AMEI, the Alarian midstream energy select index. So SMLPX is a total return focus fund, meaning we're looking at the yield plus the dividend growth and appreciation are objective. And today yields about 5.3%.
In the ETF, we're targeting an income approach first and foremost and then tell return second. So what we do is we basically own similar stocks in the two strategies. However, we naturally have a bias to pick higher yielding stocks in the ETF. So we're overweight, some of the 7 and 8% yielders. There are a couple stocks in the midstream market like Scheneer, LNG, that only yields 1%. Well, that's not a great fit, you know, for an income product or a target two and a half percent.
Market Context and Positioning
So the gross yield is 6.3. We actually can get a little bit more yield than when you're getting an SMLPX, just by tweaking our stocks selection or an active image ETF. We have a 6% team been doing this 17 years. Then what we do is say, okay, we have what we think is the optimal portfolio for return. Let's layer on top one month or two month covered calls. And so what we do there is we look at this strut and we look at the listed option market, you know, no private options, no no flex options, just listed options that are liquid price every day.
You could take some out of that and plug this into a 10 or 11 yield and feel like you're adding value to the client's portfolio because you're picking up that guaranteed income while lowering the beta. And so I think it could be in the alternative bucket. These are all public stocks. So it's probably more likely to be in the equity bucket, but an income value add. And there's so many, you know, so I mean, the market, it's had a good rally.
So they bought us as a addition to their platform. And energy fits in great into the value DNA of the firm. You know, energy stocks are cheap, high dividend yield, our portfolio yields about 6%. And we have a adaptive asset allocation business called broad mark. That was part of salient. And then Westwood has a multi-asset class business that's run by my partner, Adrian Helford, that does a variety of things in both fixed income and equities. And so that's, you know, I think a very helpful strategy.
Notable Insights
"And that's why you find a lot of stocks are right around 4.9."
Key Takeaways
- The podcast episode of "Behind the Ticker" featuring Greg Reid, the president of Real Assets at Westwood, offers a detailed insight into his background, the firm’s operations, and the innovative strategies they employ.
- The conversation explores important themes in income investing relevant to today's advisor landscape.
- The conversation explores important themes in etf structure relevant to today's advisor landscape.
What This Means for Advisors
For financial advisors evaluating options for client portfolios, this conversation with Greg Reid highlights important considerations around fixed income. Understanding the strategy behind each fund—not just the ticker—helps advisors make more informed allocation decisions and better communicate the rationale to clients.
The themes of fixed income and income investing discussed in this episode are particularly relevant in the current market environment, where advisors are increasingly looking for differentiated solutions that go beyond traditional benchmarks.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Greg Reid, including additional nuances and details, listen on Spotify, Apple Podcasts, or watch on YouTube.