Investors looking for a tactical allocation approach to energy and for yield, have been looking at the Guggenheim Canadian Energy Income Fund (NYSEArca: ENY) recently. This exchange traded fund (ETF) has experienced strong trading activity. On Friday, March 11th, the ETF had a spike in trading volume in excess of 2.4 million shares. [Canada ETFs: An Indirect Commodity Play.]
Some of this activity was spurred by higher oil prices, as the fund tracks a tactical allocation index that allocates between Oil Sands and High Yielding Canadian Energy Equities based upon the price trend of oil. The 6-month average trading volume is 113,455 and assets are at $185.6M. How does the index work?
If the current quarter’s oil price is above the four quarter moving average oil price, then oil is deemed to be in a bull phase and the allocation is 70% oil sands and 30% high yielding Canadian energy stocks. If the oil price is below the moving average, it is deemed to be in a bear phase, with an allocation of 30% oil sands and 70% Canadian energy stocks. This approach give investor greater exposure to oil while prices are rising and gives higher yields during the declining oil environment.
The allocation is currently in a bull phase with a yield about 2.4% gross. At the end of the fourth quarter, the yield was 3.06%, which included a bear phase.
Natural resources are no small part of the Canadian economy and this ETF can give you that exposure.
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.