Texas, Oklahoma ETFs Slash Expense Ratios

by on November 18, 2009 | ETFs Mentioned:

Oklahoma City-based Geary Advisors, LLC announced today that they are in the process of reducing the fund fees for their two state-specific ETFs, including the TXF Large Companies Exchange-Traded Fund (TXF) and the Oklahoma Exchange-Traded Fund (OOK). When these ETFs were initially launched (OOK in late October and TXF in early November), both charged fees of 85 basis points, making them significantly more expensive than most large cap domestic funds.

Cotton Bowl, Home of the Texas-Oklahoma RivalryFollowing the significant reduction, the state-specific ETFs will be competitive with both broad-based large cap ETFs and sector-specific energy funds. Following the change, both OOK and TXF will be cheaper than the SPDR Energy Select Sector Fund (XLE), which charges an expense ratio of 21 basis points. “I believe these funds are excellent way to invest in Oklahoma and Texas companies, many of which are related to the energy sector,” said Keith Geary of Geary Advisors. “We are in the process of lowering the management fees in pursuit of competitive excellence. We feel we have a great product and want these funds to be competitive with similar funds.”

The Texas ETF is an interesting product, investing exclusively in large cap companies headquartered in Texas. As one might suspect, this includes big allocations to a number of companies in the energy industry (such as ConocoPhillips, Exxon Mobil, and Schlumberger), but the fund also offers some diversity in holdings. Southwest, Burlington Northern, Whole Foods, AT&T, Dell, and DR Horton are among the other stocks included, providing exposure to a number of other sectors.

OOK is similar, with big allocations to natural gas and oil firms such as ONEOK Partners and OGE Energy, but the ETF also holds stocks like Sonic, Southwest Bancorp, Bancfirst Corp., and Pre-Paid Legal Services.

We were skeptical of the funds’ prospects for success following its launch, but our doubts were primarily related to the sky-high expense ratios. But now both OOK and TXF have swung to the opposite end of the expense spectrum, making them interesting investment options for investors looking to overweight the energy sector while still maintaining some diversity of holdings. Another positive aspect of these funds is the commitment to philanthropy: a minimum of 10% of management fees from both OOK and TXF go to Aaron’s Bridge, an organization that facilitates access to more treatment options in Oklahoma and Texas for children with developmental disabilities.

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Disclosure: No positions at time of writing.