TriVest unveils Canadian High Yield Energy Index

Apr 18th, 2013 | By | Category: ETF and Index News

TriVest Wealth Counsel, a Canadian investment management firm with specialty fund offerings in the energy space, has announced the launch of the Canadian High Yield Energy Index, a new index offering dedicated exposure to the Canadian energy income sector.

TriVest unveils Canadian High Yield Energy Index

The Canadian High Yield Energy Index tracks the Canadian energy income sector.

The index is comprised of companies listed on the Toronto Stock Exchange (TSX) involved in the E&P, Oilfield Services, Energy Infrastructure, and Mid-Stream sectors that currently pay a dividend exceeding 4% per annum.

The index is rebalanced on a quarterly basis with no constituent comprising more than 10% of the index. Each constituent must have a minimum free float market capitalisation of at least C$500 million.

The index includes leading companies such as Canadian Oil Sands, Crescent Point Energy, Pembina Pipeline, Husky Energy, Arc Resources, Inter Pipeline Fund, Penn West Petroleum, Baytex Energy, Vermilion Energy, and Altagas.

Commenting on the launch, Martin Pelletier, Portfolio Manager at TriVest Wealth Counsel, said: “Ever since the Federal Government’s decision to tax income trusts back in October 2006 many have simply forgotten about the positive investment merits of the sector. These oil and gas trusts did not go away, instead they have adapted and currently offer some very attractive dividend yields. The sector is also expanding with the larger junior producers targeting to grow into a high-yield dividend structure.”

Until its launch, no industry standard existed for gauging the aggregate performance of the high yielding energy sector, nor did a straightforward means of hedging exist. The index provides a solution for investors to benchmark one’s holdings in the Canadian energy income sector; track the overall performance of the sector and its investment merits; and passively invest in the sector that currently is yielding approximately 6% per annum.

Craig Stanford, Portfolio Manager at TriVest Wealth Counsel, added: “One of the biggest problems for the individual or institutional investor is in selecting which company in the sector to invest in, which one will have a sustainable dividend given the volatility of the commodity sector. Investing in a low-cost high-yield energy index provides increased safety through diversification and minimises stock specific risk while still achieving the goal of a high yield.”

The index has a strong track record on a back-dated basis to March 18, 2013. It has outperformed the S&P TSX Capped Energy Index over the past five years by 6.8% per annum, generating a 3.5% annualised rate of return compared to -3.3% annualised loss for the S&P TSX Capped Energy Index.

The index is calculated on a daily, total-return basis by Structured Solutions, a boutique index provider based in Frankfurt, Germany. The index is available in real-time from Structured Solutions as well as via third-party providers such as Bloomberg and Reuters.

For investors seeking immediate exposure to the Canadian high-income energy sector, investors could consider the NYSE-listed Guggenheim Canadian Energy Income ETF (ENY). This fund is linked to the performance of the Sustainable Canadian Energy Income Index, an index comprising 34 stocks selected from a universe of companies listed on the TSX, NYSE AMEX, NASDAQ or NYSE.

The universe of companies includes approximately 200 TSX-listed oil and gas sector securities including royalty trusts, as defined by the TSX, and approximately 25 oil sands resource producers that are classified as oil and gas producers. The index has many of the same constituents as TriVest’s new Canadian High Yield Energy Index, including all of the names mentioned above (excluding Inter Pipeline Fund).

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