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Horizons Canadian Oil and Gas Equity Covered Call ETF (ENCC)
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Hamilton Energy Yield Maximizer ETF (EMAX)
Q: I have held Freehold for a little over 2 years, and am no more than even on the stock price (but at least have the dividends). Similar to James' question today, I am thinking about selling FRU and moving to an energy income ETF. I have been looking at EMAX, but was not aware of ENCC that was mentioned by James. EMAX is new, but I like the North American approach vs ENCC which appears to be only Canadian companies. Could you compare the pros and cons of each ETF, including taxation of distributions, call strategy and any trading premium to NAV. Do you have a preference of one over the other? My objective is some sector exposure and income, more than capital gains.
Thank-you
Thank-you
5i Research Answer:
ENCC has $310M in assets, fees of 0.84%, and a five year annualized 15.05% return. Managers have discretion, but call options (out of money) are written on 30% to 50% of the fund. Last year about 77% of the distribution was capital gains and the balance eligible dividends.
EMAX has $112M in assets, fees of 0.65%, one month return of 12.5% (only one month of data). It writes calls (at the money) on 30% (max) of its portfolio. Tax breakdown is not yet available, but will likely be skewed to capital gains.
It is hard to compare EMAX with its limited history. But we do also like the US component for better diversification. We would be comfortable with it. Also, limiting calls to 30% may serve it better in a sector rally.