The iShares MSCI Canada ETF: Rupert's Land

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Includes: ACLLF, ANCTF, BBRY, BCE, BDRBF, CAT, CDNAF, CDUAF, CNRD, CP, IGIFF, JCOUF, POFNF, PWCDF, RAD, RCI, TRI, TRP, TU, VRX
by: Accendo Markets

Summary

The fund’s holdings are heavily related to commodities, mining and energy.

Canada’s trade relationship is mainly with the U.S. and far less with the Asia-Pacific region.

Nearly half of the fund’s holdings are well established companies with NYSE listings.

The fund's holdings are heavily related to commodities, mining and energy Canada's trade relationship is mainly with the U.S. and far less with the Asia-Pacific region. Nearly half of the fund's holdings are well established companies with NYSE listings

One of the most amazing bits of trivia about Canada begins shortly after the first New World explorers set up their camps in Hudson's Bay. In fact, the first trading company was named for the harbor which provided the shortest, but by no means easiest passage to and from Europe: the Hudson's Bay Company. True, this is perhaps the most well-known names in the history of modern business. However, because of the fame of the Hudson's Bay Company what often overlooked is that the charter was granted to a nephew of King Charles II of England. He was an adventurous entrepreneur by the name of Prince Rupert of the Rhine. So what's so special about that? This charter granted a full 1/3 of Canada his own private estate! This came to be known as Rupert's Land. The 'estate' included Northern Quebec, Labrador, Nunavut most of Alberta, Ontario and Saskatchewan, all of Manitoba, parts of the Northwest Territories and even parts of what would eventually become parts of the United States! It all totaled about 1.51 million square miles! That's about five times the size of France! An estate, mind you! At the time, beaver pelts and timber were the most important commodities to be harvested from this New World. Those were the most important commodities of his era. Had the Prince only knew of how much gold and silver was literally scattered throughout his estate, not to mention those other important metals in demand at the time like iron ore and copper. Among the interested buyers of the commodities of Rupert's estate were an expansion hungry United States, the British Empire and a new Canadian Confederation. Over time and a bit of negotiations, eventually a three way deal transferred Rupert's estate to the Canadian Confederation via the U.K. And so it all became a united and an autonomous dominion of the United Kingdom.

BlackRock (NYSE:BLK) offers investors a chance to pick up where Prince Rupert left off, give or take a few centuries, through its iShares MSCI Canada ETF (NYSEARCA:EWC). The fund first listed in March 1996 and has respectable $1.7 billion dollars in net assets. The fund trades on the NYSE with over 80 million shares outstanding. Liquidity is not an issue; the fund has an average 20 day volume of nearly 600,000 shares per day. The total expense ratio is 0.47% and the fund is currently priced at a 0.26% premium to NAV. Lastly, the fund currently has 93 holdings.

It's no secret that Canada is heavily dependent on commodity exports. The government and central bank have expressed their concerns over the sharp across the board decline of commodity prices, but particularly that of petroleum. The central bank has reduced its benchmark rate target to 0.50% over the past two years in order to help stimulate the economy. It seems that the low rates have helped as much as they could, but the problem is still a matter of too much global supply and declining global demand. However, Canada is holding an ace in its export hand: it has an extraordinary trade advantage as a member of the North American Free Trade Agreement (NAFTA). Although the economy of the U.S. has been slow, it has been positive and the U.S. economy is Canada's primary export destination. Over 76% of all Canadian exports are destined for the U.S. China runs a distant second at a mere 3.69% of total exports.

Data from WITS

Similarly, 77% of Canada's imports originate from its top five import partners; over 54% of total imports originate from the U.S. Again, China is Canada's second largest import partner at about 11.5% of total.

Data from WITS

One other NAFTA advantage is that over many years, U.S. auto manufactures have established manufacturing facilities in Canada having both to assembly to completion as well as 'semi-manufacturing' of vehicle components as well as auto parts, in general. In 2015, U.S. auto sales set an all-time record with 17.5 million units sold. The chart below demonstrates the importance of Canada's vehicle and vehicle parts export industry relative to its top five exports, which account for 41% of total exports.

Data from OEC

Note that of that 41%, 12.4% is auto industry related; hence about 30% of those top five exports.

The fund's sector allocation, based on the passively managed MSCI fund is heavily weighted to the commodity industry. The financial sector allocation dominates all other sectors. However, energy and materials, both industries very dependent on commodities, account for just over 28% of the fund's allocation combined.

Data from BlackRock

Interestingly, the fund has held up well during the global economic commodity price contraction. The fund is well above its 2008 - 2009 credit crises lows and the fund has generated steady semi-annual distributions.

Click to enlarge

Although it certainly seems that the commodity story may only be in its mid-chapters, it might be worth taking a closer sector by sector look at the fund's holdings.

>1% Financial Holdings 35.5806%

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Royal Bank of Canada

RY

8.0905%

4.42%

45.64%

9.02%

11.02

12.23%

222.55

52.27%

Toronto Dominion

TD

7.3513%

3.83%

20.34%

6.52%

22.43

1.08%

217.03

62.87%

Bank of Nova Scotia

BNS

5.0548%

5.00%

47.69%

6.77%

9.87

8.12%

159.54

65.60%

Bank of Montreal

BMO

3.6822%

4.46%

49.07%

2.96%

11.87

5.52%

112.39

54.12%

Manulife Financial Corp.

MFC

3.008%

3.40%

50.77%

-6.08%

16.39

-0.90%

21.11

53.74%

Brookfield Asset Management Inc

BAM

2.7613%

1.52%

16.89%

3.91%

9.83%

-1.13%

263.24

61.37%

Canadian Imperial Bank of Commerce

CM

2.6462%

5.05%

48.37%

4.32%

10.27

6.09%

65.56

70.75%

Sun Life Financial Inc

SLF

1.9349%

3.74%

42.12%

4.77%

12.37

-7.04%

26.67

54.43%

Fairfax Financial

OTCPK:FRFHF

1.0514%

1.82%

49.14%

4.56%

24.36

10.78%

33.78

24.74%

Averages

3.95%

3.69%

41.11%

4.08%

13.186

3.86%

124.652

55.54%

Click to enlarge

Most of the financial institutions in this sector are world class; 8 of 9 listed on the NYSE as well as the Toronto Exchange (TSX). The average yield of these top holdings is 3.69% with a well sustainable average payout ratio of 41.11% and an average 5 year dividend growth rate of over 4.00%.

<1% Financial Holdings 6.80%

Exchange: Ticker

Weight

Yield

Type

National Bank of Canada

OTCPK:NTIOF

0.9737%

5.36%

Bank; Banking Services

Intact Financial Corp

OTCPK:IFCZF

0.8468%

2.39%

Property & Casualty Insurance

Power Corporation of Canada

OTCPK:PWCDF

0.7909%

4.30%

Diversified Financial holding company

Great West LifeCo Inc

OTC: GRWTF

0.7518%

3.78%

Diversified International Financial holding company

Power Financial Corp

OTCPK:POFNF

0.5824%

4.68%

Diversified international insurance/materials holding co.

CI Financial Corp

OTCPK:CIFAF

0.5299%

4.31%

Wealth, asset, fund management company

Onex Corp

OTCPK:ONEXF

0.5192%

0.29%

Private Capital, pension, Sovereign Wealth management

Element Financial Corp

OTC:ELEEF

0.4661%

0.60%

Vehicle, aviation, freight transport leasing and management

Industrial Alliance Insurance & Finance

OTC:IDLLF

0.3261%

2.72%

Stock insurance, fund and wealth management

Riocan Real Estate Investment

OTCPK:RIOCF

0.2725%

5.95%

Closed end REIT

IGM Financial Inc

OTCPK:IGIFF

0.2538%

6.37%

Financial holding company; Investment management and planning

H&R Real Estate Investment Trust

TSX: HR

0.1983%

6.73%

Open end REIT

First Capital Reality

OTC:FCRGF

0.1503%

4.69%

Consumer Staple property investment and management

Smart Real Estate Investment Trust

TSX: SRU

0.1408%

5.47%

Open end REIT

Total/Average

6.8026%

4.12%

Click to enlarge

The total of holdings less than 1% add up to 6.8%; a substantial amount. The more interesting financial institutions are the 'holding companies'. For example, Power Corporation of Canada describes itself as a diversified management and holding company. It should be noted that Power Financial, Great West LifeCo and IGM are holdings of Power Corp and are held by the fund in amounts less than 1%. This means that, in effect, Power Corp along with its holdings account for 2.37% and thus, as a combined entity, would fit in with the larger holdings. The important thing to be aware of is the overlap in the smaller weighting's financial group.

>1% Energy Holdings 12.3051%

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Suncor Energy Inc

SU

3.7295%

3.36%

NA

1.77%

543.37

17.93%

36.36

68.46%

Enbridge Inc

ENB

2.8261%

4.78%

NA

13.60%

NA

-8.70%

225.70

70.51%

Canadian Natural Resources Ltd

CNQ

2.392%

3.10%

232.56%

33.78%

76.41

27.48%

60.07

66.58%

TransCanada Corporation

TRP

2.3119%

4.61%

86.34%

4.78%

19.13

3.43%

151.23

60.21%

Cenovus Energy Inc

CVE

1.0456%

3.69%

99.00%

36.09%

20.98

-0.03%

48.51

73.09%

Averages

2.46102%

3.91%

139.30%

18.00%

164.97

8.02%

104.37%

67.77%

Click to enlarge

Of the >1% holdings, almost all are related to Oil Sand, Oil Sand Refining and oil and gas pipeline distribution. Currently, the average yield is 3.91% with a rather high average payout ratio and an average dividend growth rate that may still be reflective of oil demand of three or more years ago. The harvest for consolidation is ripening. On March 18 TransCanada purchased Columbia Pipeline Group, a $10.2 billion acquisition. What makes the acquisition particularly interesting is that this is a cross border transaction giving TRP. The acquired 15,000 miles of pipeline stretches into the Marcellus shale in Pennsylvania, New York, Ohio and West Virginia. There is an important point to be made here. Things look dire for the energy industry, however, this creates opportunity. TRP has positioned itself for the reverse cycle. No one could predict exactly when the down cycle might bottom and reverse, but TRP will be ready whenever that may be.

1%< Energy Holdings 7.0979%

Exchange: Ticker

Fund Weight

Yield

Type

Imperial Oil Ltd

IMO

0.9617%

1.29%

Petroleum exploration, production, refining

Pembina Pipeline Corp

PBA

0.7398%

6.07%

Pipeline petroleum and gas distribution

Crescent Point Energy Corp

CPG

0.5734%

7.44%

Canadian-US exploration and extraction

Inter Pipeline Ltd

OTCPK:IPPLF

0.5337%

7.02%

Petroleum sand, crude, gas transportation and distribution

Keyera Corp

OTC:KEYUF

0.4905%

3.73%

Midstream transportation and distribution

Cameco Corp

CCJ

0.4807%

2.34%

Uranium mining, refining and distribution.

Arc Resources

OTCPK:AETUF

0.4102%

7.19%

Acquires and develops oil and gas properties

Encana

ECA

0.4073%

5.50%

Oil and gas exploration, extraction and production

Husky Energy Inc

OTCPK:HUSKF

0.3647%

8.25%

Petroleum exploration, extraction and refining

Altagas Ltd

OTCPK:ATGFF

0.3223%

6.41%

Mainly natural gas distribution for electricity generation

Tourmaline Oil Corp

OTCPK:TRMLF

0.2962%

0.00%

Oil and gas explorations and development

Vermilion Energy Inc

VET

0.2948%

6.86%

International Oil and Gas Exploration; Canada, U.S. and Europe

Canadian Oil Sands Ltd

OTCQX:COSWF

0.2946%

2.42%

Petroleum mining investment company

Peyto Exploration & Development

OTCPK:PEYUF

0.2676%

5.31%

Petroleum exploration and production

Prairiesky Royalty

OTC:PREKF

0.2343%

5.93%

Develops energy royalty assets

Veresen Inc

OTC:FCGYF

0.1812%

11.28%

Petroleum and gas pipeline distribution

Seven Generations Energy Ltd

OTC:SVRGF

0.1575%

0.00%

Shale hydrocarbon development

Meg Energy

OTCPK:MEGEF

0.0874%

0.00%

Oil recovery from developed fields

Total

7.0979%

4.84%

Click to enlarge

Many of the less than 1% holdings are explorers, drillers and 'midstream' distributors. In a nutshell, the bulk of the entire sector allocation is heavily weighted in the upstream portion of the petroleum industry. Also note that the total <1% holdings add up to 4.84%. Since they're so very similar, if viewed as a single entity, it would be the heaviest Energy weighting of all energy holdings.

>1% Materials Holdings 2.685%

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Potash Corp of Saskatchewan

POT

1.4571%

8.88%

84.55%

60.86%

9.71

10.89%

48.00

81.44%

Agrium Inc

AGU

1.2279%

3.92%

54.98%

94.09%

14.96

18.73%

105.00

70.52%

Averages

1.3425%

6.40%

69.77%

77.48%

12.335%

14.81%

76.50

75.98%

Click to enlarge

1%< Materials Holdings 5.9529%

Exchange: Ticker

Fund Weight

Yield

Type

GoldCorp Inc

GG

0.9571%

2.08%

Gold mining

Barrick Gold Corp

ABX

0.8606%

1.08%

Gold mining

France Nevada Corp

FNV

0.7187%

1.77%

Royalty Stream from gold, platinum assets or distribution

Agnico Eagle Mines Ltd

AEM

0.5695%

1.22%

Gold mining and production

Silver Wheaton Corp

SLW

0.4972%

1.55%

Precious metals mining and royalty stream

CCL Industries Inc

OTC:CCDBF

0.4552%

0.67%

Specialty packaging

Methanex Corp.

MEOH

0.3024%

3.33%

Methanol production and distribution

West Fraser Timber Co. Ltd

OTCPK:WFTBF

0.2612%

0.53%

Wood products, lumber, pulp and paper

First Quantum Minerals Ltd

OTCPK:FQVLF

0.258%

1.58%

International strategic, industrial metals mining

Turquoise Hill Resources Ltd

TRQ

0.2537%

0.00%

Copper/Gold mining in Mongolia

Teck Resources Ltd

TCK

0.2163%

1.87%

Development metal mining

Eldorado Gold Corp

EGO

0.215%

0.49%

International gold mining

Kinross Gold Corp

KGC

0.2103%

0.00%

Gold mining

Yamana Gold Inc

AUY

0.1777%

3.23%

International gold mining

Totals

5.9529%

1.39%

Click to enlarge

Both of the heavier weighted companies are well-known manufactures of agricultural products. However, the less than 1% holding add up to a substantial 5.9529%. This is significant since 11 of those 14 less than 15 holdings accounting for 4.9341% of the materials are gold, precious metals, precious metal mining companies or related companies.

>1% Industrials

6.4624%

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Canadian National Railway Co.

OTCPK:CNRD

4.5115%

1.65%

27.67%

14.64%

18.19

14.46%

72.48

77.80%

Canadian Pacific Railway Ltd

CP

1.9509%

0.79%

15.30%

7.18%

19.71

20.75%

217.36

67.93%

Averages

3.2312%

1.22%

21.49%

10.91%

18.95

17.61%

144.92

72.87%

Click to enlarge

1%< Industrials Holdings 1.1605%

Exchange: Ticker

Fund Weight

Yield

Type

SNC Lavalin Group Inc

OTCPK:SNCAF

0.453%

2.43%

Engineering, Construction Environmental Infrastructure

CAE Inc

CAE

0.2982%

1.95%

Aviation, Defense, Security education/training

Finning International

OTCPK:FINGF

0.2287%

3.91%

Exclusive distributor for Caterpillar (NYSE:CAT) equipment and parts

Bombardier Inc

OTCQX:BDRBF

0.1806%

0.00%

Aircraft and rail equipment manufacturer

Totals

1.1605%

2.07%

Click to enlarge

The industrial holdings are major rail transportation companies. The Canadian National Railway along with short-line partners and container trucking holdings, extends across Canada, the U.S., Mexico plus corporate offices in South America, providing transportation solutions for both Brazil and in Asia. Similarly, Canadian Pacific has international reach, extending from Canada, to the U.S. and to Mexico.

Both railroads ship commodities, including coal and energy products. The sub 1% industrial holdings are typical construction and engineering, a heavy equipment distributor and the well-known aerospace company, Bombardier.

>1% Consumer Discretionary Holdings 3.0418%

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Magna International

MGA

1.6932%

2.17%

17.44%

76.00%

8.55

0.66%

18.44

72.24%

Thompson Reuters Corp

TRI

1.3486%

3.54%

52.89%

3.34%

15.14

19.04%

66.98

38.13%

Averages

1.5209%

2.86%

35.17%

39.67%

11.845

9.85%

42.71

55.19%

Click to enlarge

1%< Consumer Discretionary 3.7183%

Exchange: Ticker

Fund Weight

Yield

Type

Restaurants Brands International

QSR

0.7522%

1.34%

Parent company of Tim Hortons, Burger King

Dollarama Inc

OTC:DLMAF

0.7079%

0.45%

Discount general consumer products

Shaw Communications Inc

SJR

0.6967%

4.98%

Diversified media, content and communications

Gildan Activewear Inc

GIL

0.6656%

0.91%

Consumer apparel under company brands

Canadian Tire Ltd

OTCPK:CDNAF

0.6284%

1.95%

Diversified: Tires, parts; commercial property leasing

Linamar Corp

OTCPK:LIMAF

0.2675%

0.54%

Precision machining; drivetrains and industrial vehicle components

3.7183%

Click to enlarge

The standout in the consumer discretionary holdings is the business media and information company Thompson Reuters, established over 80 years ago. Thompson Reuters provides accurate, timely financial information through the Reuters News Agency. What's less well-known is that the company provides risk management solution, patent and trademark research services, intellectual property management, legal, corporate and government solutions, scholarly and scientific research and more. Hence, Reuter's goes well beyond media and altogether is in a class by itself.

Generally, the Consumer Discretionary allocations seem to be the most well diversified of all the allocated sectors: auto parts, restaurants, general retail, and active-wear. One company of note is Canadian Tire which in spite of its name, is far more than tires. Its main business is tires and auto parts, but also has interest in banking, credit card services, retail clothing and real estate.

>1% Consumer Staples

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Alimentation Couche

OTC:ANCTF

1.8737%

0.46%

8.24%

0.51%

31.89

25.12%

52.17

NA

Loblaw Co ltd

OTCPK:LBLCF

1.0858%

1.53%

54.55%

3.03%

36.68

-43.41%

89.88

15.70%

Averages

1.79975%

1.00%

31.40%

1.77%

34.285

-9.15%

71.025

7.85%

Click to enlarge

1%< Consumer Staples

Exchange: Ticker

Fund Weight

Yield

Type

Metro Inc

OTCPK:MTRAF

0.7064

1.20%

Retail food distributor

Saputo Inc

OTCPK:SAPIF

0.629

1.63%

Canadian headquartered, U.S. international dairy producer

Weston George Ltd

OTCPK:WNGRF

0.4003

1.59%

Diversified holding company, retail food; REIT, retail drugstores

Empire Ltd

TSX: EMPA

0.3208

1.55%

Retail food; retail fuel, real estate investments

Jean Coutu

OTCPK:JCOUF

0.1073

2.46%

Retail Pharmaceutical chain

Totals

3.7183

1.69%

Click to enlarge

The most notable holding is Alimentation Couche, a global convenience store operator with over 16,000 stores in Canada, U.S., Mexico, Europe, Japan, China and Indonesia. Other holdings are mostly food distributors, the exception being the Jean Coutu, a retail drug store chain. The stores are similar to the U.S. based Rite Aid (NYSE: RAD), which purchased all of Coutu's U.S. locations.

Health Care

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Valeant Pharmaceuticals International

VRX

3.3311%%

0.00%

0.00%

0.00%

57.54

19.16%

487.00

66.84%

Click to enlarge

There's only one Health Care holding, the well-known Valeant Pharmaceutical International. Valeant is an international company with production facilities in Canada, Mexico, Brazil and Poland. VRX serves markets in North America, Europe, Middle East and the Asia-Pacific region. However, on March 15, Valeant reduced its earnings forecast and noted that by delaying the filing of its annual report, it might be considered in default. CEO Michael Pearson suggested that there was enough liquidity to meet debt obligations. Further, the U.S. Securities and Exchange Commission is investigating pricing practices. The company has a total weight of 2.0833% of total fund assets. Since the fund tracks the index passively, the index would have to make changes in the healthcare sector for the fund to make changes.

1%< IT

Exchange: Ticker

Fund Weight

Yield

Type

CGI Group Inc

GIB

0.9108%

0.00%

Consulting, system integration, outsourcing solution

Constellation Software Inc

OTCPK:CNSWF

0.7986%

0.95%

Business specific software solutions (VMS)

Open Text Corp

OTEX

0.5962%

1.67%

Information management; analytics, records, information exchange

BlackBerry Ltd

BBRY

0.4651%

0.00%

Mobile hardware and communications software, services, solutions

Totals

2.7707%

1.31%

Click to enlarge

This sector account for only 2.77% of the fund whose most notable holding is BlackBerry Ltd. BBRY may rightfully claim to have initiated the 'smart mobile device' industry with its branded device and proprietary software. Since then, competition has eroded the BBRY consumer base. The company has been trying to reinvent itself, but the market is crowded with many fashionable devices. Its weighting is 0.4651%, less than one-half of one percent.

>1% Telecom Services 1.2634%

Exchange: Ticker

Fund Weight

Yield

Payout Ratio

5 Year Dividend Growth Rate

P/E

5 Year EPS Growth Rate

Total Debt to Equity

Percent of Institutions with Position

Rogers Communications

RCI

1.2634%

4.02%

70.78%

9.55%

17.99

1.74%

302.00

81.55%

Click to enlarge

1%< Telecom Services 1.1508%

Exchange: Ticker

Fund Weight

Yield

Type

Telus Corp

TU

0.5866%

4.60%

Wireless, satellite, internet services

BCE Inc

BCE

0.5642%

4.86%

Wireless, satellite, internet services,

Totals

1.1508%

4.73%

Click to enlarge

Rogers Communications is Canada's premier telecom services company and provides a full spectrum of services: mobile communications, high speed internet, media brands and other entertainment content. There are also two smaller weightings of BCE which carries the legacy 'Bell Canada' name providing general telecom services and Telus also a general provider of telecom services.

1%< Utilities 1.25%

Exchange: Ticker

Fund Weight

Yield

Type

Fortis Inc

OTCPK:FRTSF

0.7595%

4.01%

Electric and gas in Canada, U.S., Caribbean; also commercial real estate

Canadian Utilities

OTCPK:CDUAF

0.2884%

3.69%

Canadian ATCO holding; electric, gas; gas processing and storage

ATCO Ltd

OTC:ACLLF

0.1976%

2.77%

International utility holding company; utility infrastructure, distribution

Totals

1.25%

3.49%

Click to enlarge

The standout in this last sector is Atco. ATCO is essentially a utilities holding company with subsidiaries in North America and Australia. It should be noted that Canadian Utilities is one such subsidiary and it is included as a less than 1% holding.

One last point needs to be made about the U.S.-Canadian economic relationship. Of the 93 companies held by the fund, 42 have NYSE listings. Outside of that, it's difficult to make a case for a fund whose holdings are heavily weight towards commodities, mining and energy. On the other hand, Canada's trade relationship is heavily weighted towards its largest trading partner, the U.S., with arguably one of the few better performing of all global economies. Although trade with the Asia-Pacific region is not insignificant, particularly with China, the potential downside is easily offset by Canada's trade in North America.

The funds distribution may be a concern particularly as the commodity correction drags out. It will have an impact. However, business cycles are inevitable, the global slowdown will eventually fade and a new expansion cycle will replace it. Hence, the investor with a long term horizon might do well begin to allocate small portions over a long period of time, reinvesting distributions in the process. For those investors already in the fund, this might be a good opportunity to average down.

After all, imagine how well Prince Rupert might have done had he not sold out too soon!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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