This is an actively managed income ETF that invests in US and Canadian midstream energy companies and MLPs. It selects midstream names responsible for the transportation, storage, and processing of oil and natural gas, and applies covered calls to its holdings to pursue additional income.

It suits income-focused investors who want energy infrastructure exposure together with a high distribution stream.

It is an ETF run with an active management approach by Westwood.

The fund selects and holds midstream energy companies and MLPs on a fundamentals basis, using cash flow generated by transportation and storage infrastructure as its source of income. It also applies covered calls to a portion of its holdings, adding option premiums to boost the distribution level as part of an active strategy.

• Concentrated exposure to midstream energy infrastructure
• Income enhancement strategy combined with covered calls

Assets under management (AUM) stand at $300.5M, and the expense ratio is 0.80% per year.

Because it combines active management with an options strategy, its fee burden is relatively high compared with passive index ETFs, and the stability of its distribution stream is affected by energy market conditions and the options premium environment.

Performance moves with conditions in the energy infrastructure sector and the supply and demand dynamics of oil and natural gas. Given the nature of the covered call structure, upside returns may be capped in strong rallies. The distribution stream shows variability depending on the income demand environment.

In periods of strong demand for high-yield and income products, interest tends to gather around products that combine midstream exposure with option income. During periods of shifting interest rates and energy prices, fund inflows and outflows can also fluctuate, so it is necessary to monitor market conditions.

Its strengths are energy infrastructure exposure and a high distribution stream, while its weaknesses are the fee burden from combining active management with options and its sector concentration.

PFF, FPE, and PFLD shown in the table are income ETFs centered on preferred stocks and therefore belong to a different asset class, while PCEF and YYY are high-yield income products that bundle closed-end funds. In every case, the source of distributions differs from this ETF. For direct exposure to midstream energy itself, AMLP and MLPX, the representative infrastructure ETFs in the same sector, are more direct substitutes, and to broaden out to the wider energy sector, XLE can also be considered.

Here are the points to review before investing in MDST. The income appeal of a high distribution stream is a strength, but it is advisable to check in advance the midstream sector concentration, the fee structure that combines active management and options, and the profit and loss characteristics of covered calls.

Energy market conditions and oil price fluctuations are the key variables for performance, and the covered call structure can cap upside returns in bull markets. Because sector concentration is high, volatility may increase during the downswing of the energy cycle.

It is a suitable choice for income investors who want midstream energy infrastructure exposure together with a high distribution stream. If pure midstream exposure is the priority, comparing AMLP and MLPX is recommended, and for the broader energy sector, XLE as well.