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.
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.