Canoe EIT Income Fund has released its Annual Report to December 31, 2019.
| EIT Performance | ||||
| Instrument | One Year |
Three Years |
Five Years |
Ten Years |
| EIT Common Redeemable Units (based on NAV) |
+12.7% | +6.6% | +8.3% | +8.9% |
| S&P/TSX Composite Total Return Index | +22.9% | +6.9% | +6.3% | +6.9% |
Sadly, they did not publish a “whole fund” return.
Figures of interest are:
MER: “Management expense ratio excluding issue costs, interest, and distributions to preferred redeemable unit” “as a percentage of net asset value” (which I take to mean, based only on the equity represented by the Capital Units) 1.61% “as a percentage of net asset value” (which I take to mean, based only on the equity represented by the Capital Units).
Average Net Assets: There was no particularly enormous change in either the number of capital units outstanding or of the net asset value per capital unit, so let’s just take the average of the year-beginning and year-ending NAVs, including preferred shares: (1,067-million + 215-million + 1,281-million + 216-million) / 2 = 1,390-million
Underlying Portfolio Yield: Dividends received of 29.503-million + interest of 5.301-million is 34.804-million divided by average net assets of 1,390-million is 2.50%
Income Coverage: Net Investment Income of 7.935-million divided by Preferred Share Distributions of 10.683-million is 74%.
Asset Coverage: NET ASSETS ATTRIBUTABLE TO HOLDERS OF COMMON REDEEMABLE UNITS of 1,281-million + Preferred redeemable units of 216-million, all divided by Preferred redeemable units of 216-million is 6.9+:1 (downside protection of about 86%)
Closed-end funds can provide interesting opportunities in periods of market stress. In normal markets, closed-end funds typically trade a discount to their NAV (vs open-ended funds which transact after market hours on actual NAV. A reasonable body of research suggests that the discount is roughly an accommodation for the discounted value of future fees). In periods of market dislocation, discounts can swing wildly providing trading opportunities.
I used to be in and out of EIT.UN, but in the mid-naughties fund managers/ownership were gaming their warrant issues by scooping them up just prior to expiry and then tendering them in the annual exchange. I got caught thinking management would play fair and act in the interest of unit-holders. That behaviour has had me avoid this shop ever since.
I believe since 2014 investments funds are not able to issue warrants. Section 9.1.1 of NI 81-102.
James I am not sure about the downside calculation? I think it maybe is 1281MM +216MM + 94MM divided by 216 MM + 94MM. This equates to a downside protection of 80.5%. The bank debt has first priority over the preferred shares.