When thinking of developed market economies to invest in, Canada is not somewhere that naturally springs to mind. However, some large wealth managers have invested in London-listed Middlefield Canadian Income so the country must have its attractions.
“I’ve been meeting with wealth managers and they have difficulty replicating this kind of portfolio on their own, it’s uniquely Canadian, they’ve come to appreciate that we aren’t just an oil producing country,” Dean Orrico, president and manager of the trust, told Fundeye.
This trust yields 5.5 percent annually so is a good choice for those seeking income in a market where the search for yield can take investors to some pretty risky areas.
The portfolio has changed quite a bit in a year, with real estate now being its largest sector holding. Mr Orrico explained that one reason for this shift in sector weightings was the growth of e-commerce. Being an income fund, the e-commerce giants such as Amazon would not fit in the portfolio as they are primarily growth stocks. However, they need to store their goods somewhere.
“Industrial real estate used to be stable with no growth but that’s been turned on its head with the growth of e-commerce,” said Mr Orrico. It seems an interesting way to play the growth of a sector without holding any of its key companies.
Another aspect that many won’t associate with Canada is its thriving AI businesses. Toronto is a centre for AI, perhaps indicated by the fact that Google’s head of AI is based in the city.
Other parts of the portfolio are genuinely Canadian hallmarks - such as pipelines - which are the second largest sector holding in the fund. Enbridge is the fund’s top holding and is a pipeline company. It’s an interesting way to play the commodities sector as it’s not directly linked to the price of oil and with a dividend yield of 6.8 percent provides a decent level of income.
The trust does have direct exposure to commodities with one of its top holdings Parkland Energy, although My Orrico seems bullish on oil prices, happy with the $50 dollars a barrel current price.
With Brewin Dolphin invested, along with Charles Stanley and Smith & Williamson, the secret is out about Canada’s attractions. In today’s markets, it’s difficult to find this level of diversification which also pays out a healthy dividend. The Bank of Canada also seems to be following Fed Chair Jerome Powell’s lead by reigning in policy hikes and Mr Orrico thinks the bank may even loosen monetary policy.
