The ETF Underdogs, Part 6: The Odd Ones Out

Efficient Market Portfolio Plus ETF

EMPB

EMPB sits in a quieter corner of the alternative ETF market. By alternative, this refers to strategies that go beyond long-only exposure to stocks, bonds, or commodities. EMPB qualifies by using an active long-short approach implemented through other ETFs, making it a fund of funds

The strategy is built around relative value. EMPB takes long positions in ETFs it views as offering stronger return potential while shorting ETFs with weaker expected outcomes. The portfolio is managed using a systematic, rules-based process that evaluates signals such as momentum, volatility, and pattern recognition dynamics.

The short book is intended to both hedge downside risk and provide potential gains during market drawdowns, which is the core appeal of long-short strategies when they are executed effectively.

Unlike traditional modern portfolio theory, which relies on mean-variance optimization and backward-looking correlations between asset classes, EMPB uses adaptive signals to adjust exposures more dynamically.

Mean-variance optimization focuses on balancing expected returns against volatility based on historical relationships. EMPB instead emphasizes responsiveness, shifting allocations as market conditions change rather than relying solely on long-term covariance assumptions.

At present, EMPB’s portfolio reflects that structure clearly. The fund AUM is allocated close to 100% to long holdings. These holdings are hedged by placing short positions at a ~30-50% ratio of the long AUM.  The short sales generate cash, which is held to collateralize the short positions.  As discussed later in this article, investors in the fund earn interest on this cash. The end result gives the appearance that approximately 52% of assets are held in cash, which is typical for long-short strategies, given the role of cash collateral tied to short positions.

On the long side, the ETF has exposure to telecommunications, the 20-year Treasury, semiconductors, retail, oil exploration and production, and the NASDAQ 100.

On the short side, it is positioned against healthcare, utilities, consumer discretionary, and consumer staples. The fund is also short the ARK Innovation ETF (ARKK), along with materials, industrials, home construction, metals and mining, and uranium.

Conceptually, EMPB resembles a hedge fund packaged in an ETF wrapper. The key distinction is cost structure. While hedge funds often charge a 2% management fee plus 20% of profits, EMPB operates within an ETF framework.

The stated management fee is 1.00%. Additional costs include dividend and interest expenses on securities sold short at 0.48% and acquired fund fees and expenses of 0.34%, bringing total annual fund operating expenses to 1.82%.

However, the adjusted expense ratio is listed at 0.32% on the fund website, which reflects the offsetting interest income earned on cash collateral from short sales, benefiting from overnight rates around 3%.

Tortoise MLP ETF

TMLP

You likely know Tortoise Capital from its long-running lineup of closed-end funds focused on infrastructure assets, particularly master limited partnerships.

What may be less familiar is the firm’s expansion into ETFs that stay close to that core expertise while aiming to deliver more efficient exposure. The most recent example is the Tortoise MLP ETF

MLP ETFs face a structural constraint. To hold MLPs directly above a 25% allocation, an ETF must be structured as a corporation, which subjects the fund to a 21% federal corporate tax at the fund level. That tax drag is a major reason why pure-play MLP ETFs often show meaningful tracking error versus their benchmarks.

Limiting MLP exposure to 25% or less allows an ETF to qualify as a regulated investment company (RIC) and remain a pass-through vehicle, but that comes at the cost of diluted MLP exposure.

TMLP takes a different route. It retains the regulated investment company structure while avoiding direct MLP ownership altogether. Instead, the fund uses total return swaps backed by U.S. Treasury bills to gain synthetic exposure to MLPs. The end result is economic exposure that closely resembles owning MLPs, delivered in a more tax-efficient wrapper.

This use of derivatives is notable because it is not designed to enhance yield or manage drawdowns, but to solve a structural problem in accessing a difficult asset class. As a result, TMLP may be better positioned to track its benchmark than corporate-structured MLP ETFs.

It is also priced more competitively, with a 0.50% expense ratio versus 0.85% for a comparable offering tied to Alerian indexes. Since launching in December 2025, the ETF has gathered roughly $36 million in AUM, an early sign of investor interest.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.