What are we looking for?
Global stock ETFs and DIY funds making active oil nets.
The screen
Over the weekend, OPEC+ oil producers announced a surprise cut to production, causing a ripple in oil prices around the globe. Canadian investors in particular might be extra-sensitive to changes in oil prices in domestic portfolios given the energy sector’s dominance in our benchmark index, today making up about 17 per cent of weight in the S&P/TSX Composite Total Return index. This rather high concentration in energy companies can be contrasted with global markets, where energy companies make up only 5 per cent of market cap (according to the Morningstar Global Markets Total Return index, which includes 7,950 stocks). As such, global equity managers are not handcuffed to a high exposure of energy in their benchmark indexes. In other words, those that are exposed to energy are doing so actively. Given the recent moves in oil prices, I thought to highlight those that had substantial exposure to oil. To do this, I used Morningstar Direct to screen the universe of Canadian-domiciled ETFs and DIY mutual funds (or those that are available through discount brokers without embedded fees for advice) for global equity funds with high exposures to the energy sector.
What we found
The funds that meet the above requirements are listed in the table, alongside their tickers, management expense ratios (MERs), ratings, returns and energy exposure. I note importantly that the table includes two distinct ratings: (1) the Morningstar Rating for Funds, which is an objective look back at a fund’s after-fee, risk-adjusted performance against the category to which it belongs; and (2) the Morningstar Quantitative Rating, which is Morningstar’s assessment of a fund’s ability to produce above-average returns in the future, based on our analysis of people (quality of the management team), parent (stewardship of the fund company), and process (robustness of investment decision making).
This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.
Ian Tam, CFA, is director of investment research for Morningstar Canada.
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Ian Tam, CFA