Canadian oil & gas trusts vs commodity fund

[kevink]

I got into Canadian oil & gas royalty trusts long before learning about PCRIX and other broader commodity funds. No complaints on their performance, but have been trying to be more disciplined about diversification and am concerned about being overweighted in energy. Current portfolio is 40% intermediate-term bonds, 40% very broadly diveresified stocks (DFA funds with international/value/emerging markets tilt), 10% Vanguard REIT Index, 10% oil and gas royalty trusts.

Grateful for any comments!

 

[Maximillion]

I own EIT.UN and SDT.UN , both trade on the TSX, a Trust of Trusts, contain REITS, O&G, etc.

Check out their portfolio, if it meets your expectations, it is a way to diversify with professional management.

http://www.stockhouse.ca, you can go to bullboards, or you can type in $trsts, general discussion on Trusts with specific answers to specific questions

iluvnascar is one of the more informed posters.

 

[brewer12345]

I'm not very familiar with these trusts, but most of them are leveraged, right? As such, you would likely magnify the risk and reward characteristics of the underlying commodities. I prefer to keep it simple and stick with a commodity futures fund like PCRIX.

 

[Maximillion]

Brewer, an Income Trust pays out its' earnings to unit holders, depending upon the Trust, it might be all the profits or some of the profits, some maybe retained for future acquisitions.

Trusts run the Gammut from Yellow Pages(YLO), to Envelope Companies, to Matress Companies, Nursing home Suppliers etc, their main feature is they pay out their profits.

EIT.UN and similar groups do the analysis for you and put them together with a weighting across all sectors, hopefully not including the weaker ones.

 

[brewer12345]

Brewer, an Income Trust pays out its' earnings to unit holders, depending upon the Trust, it might be all the profits or some of the profits, some maybe retained for future acquisitions.

I understand that. They look a lot like master limited partnerships or BGF. All f the MLPs I am familiar with (and BGF) are loaded up with a significant amount of debt. I suspect that is the case for the income trusts as well. If that is the case, the underlying economics would be significantly different from an investment in commodity futures.

 

[Nords]

Max, the question was "are they leveraged"?

While it may be amusing to see a basic investment lecture being delivered by an economist to a hedge-fund analyst, the question remains unanswered. Did you not answer the question because you missed it, or because you didn't want to admit ignorance or do research or point to a link that would answer the question?

 

[Maximillion]

Nords, take a deep breath.

Are they leveraged, well, as Business' I would assume that they do have Borrowed Money that they run their business' on, and this is obviously leverage.

Is Chrysler leveraged, GE etc, of course they are.

I would suspect some have higher borrowings than others, you are certainly welcome to do your own DD, but when I buy a Trust of Trusts, Management are paid to look at those issues and reject borderline situations.

SLV and FXE are two Commodity ETF's if that is more to your liking, GLD/NYSE of course is well known.

I do not do exhaustive Financial Analysis when I make a buying decision, I rely upon a variety of Instruments , this year it is well ahead and the decisions that got me here will stay for the remainder of the year.

http://www.financialwebring.com

There are some very good people there with more Professional skills than I have, questions may be posed, as detailed and as specific as you want, some of the posters are really very good .

 

[brewer12345]

Translation: He doesn't know and is too lazy to go find out.

 

[MooreBonds]

I own EIT.UN and SDT.UN , both trade on the TSX, a Trust of Trusts, contain REITS, O&G, etc.

I purchased each of the above securities in the Pink Sheets market with the symbols EVDVF (for EIT) and SSDUF (for SDT).

Why not check out their homepages for more info on the leverage question?

www.enervest.com
www.sentryselect.com

 

[kevink]

Thanks for the posts. For the oil and gas trusts, the best source of info I have found is:

http://mcdep.com

You can click on the most recent post there and get up-to-date info on the debt question. For the royalty income trusts I own (specifically, Enerplus, PennWest and Canadian Oil Sands), the leverage is pretty minimal.

I view these trusts as hybrid investments with stock-like volatility but also a very steady income stream (indeed the income is so good that it makes the impressive price appreciation of these funds in recent years almost an afterthought). I don't see any reason to pay the management fees for a "trust of trusts," and am only interested in the energy sector for these.

Sounds like I may have to put a few % in PCRIX, though it's hard to feel inspired given its performance vs. ERF.