Looking to invest in Canadian energy?
One of the easiest ways to do so without picking your own stocks is using by using an ETF.
This iShares XEG ETF review will show you if this energy investment will be the right fit.
All-Equity Exchange-Traded Fund
BlackRock iShares XEG is an all-equity exchange-traded fund (ETF) that provides you with exposure to Canadian oil and gas companies trading on the Toronto Stock Exchange (TSX).
- Targeted exposure to companies in Canada’s energy sector
- Well diversified
- Can find other energy ETFs with lower MERs
BlackRock iShares XEG ETF tracks the S&P/TSX Capped Energy Index.
Launched on March 19, 2001, the index follows the publicly-traded Canadian companies’ performance in the Toronto Stock Exchange’s (TSX) massive oil and gas industry.
iShares XEG ETF is classified as a high-risk investment.
XEG.TO is currently trading at close to $15.19.
XEG Key Facts
As of June 30, 2022:
- Ticker Symbol: XEG.TO
- Exchange: Toronto Stock Exchange
- Assets Under Management: $2.15 Billion
- MER: 0.61%
- 12-Month Trailing Yield: 1.91%
- Currency Traded: CAD
- Registered Accounts Availability: Yes
iShares XEG has a Management Expense Ratio (MER) of 0.61%, which is considerably higher than several other ETFs.
However, its MER is significantly lower than mutual fund products that provide investors with similar features and benefits.
iShares XIU’s dividend yield as of July 14, 2022:
- 12-month trailing yield: 2.15%
- Distribution yield: 3.26%
- Dividend schedule: Quarterly
Here is the growth of a hypothetical $10,000 since the inception of iShares XEG:
As of June 30, 2022:
| 1y | 3y | 5y | 10y | Incept. | |
|---|---|---|---|---|---|
| Total Return (%) | 67.49 | 21.93 | 8.94 | 2.37 | 5.85 |
| Benchmark (%) | 68.70 | 22.43 | 9.46 | 2.91 | 6.43 |
iShares XEG ETF invests in 14 publicly-traded energy companies, which aims to reflect the Canadian energy industry’s performance overall.
As of July 14, 2022, iShares XEG ETF has allocated 99.92% of its funds to equity securities. It holds the remaining 0.08% of its assets in cash and derivatives, making it an all-equity ETF.
| Asset Class | Investment |
|---|---|
| Canadian Equity | 99.92 |
| U.S. Equity | 0.00 |
| International Equity | 0.00 |
| Fixed Income | 0.00 |
| Other | 0.00 |
| Cash | 0.08 |
Canadian Natural Resources Ltd. is its most significant holding, accounting for a quarter of its total assets.
At 25.04% asset allocation as of July 15, 2022, Canadian Natural Resources is its largest holding.
Suncor Energy Inc. closely follows it at a 23.83% weighting. Cenovus Energy is its third most significant holding at an 11.31% weighting.
| Ticker | Name | Weight (%) |
|---|---|---|
| CNQ | CANADIAN NATURAL RESOURCES LTD | 25.04 |
| SU | SUNCOR ENERGY INC | 23.83 |
| CVE | CENOVUS ENERGY INC | 11.31 |
| TOU | TOURMALINE OIL CORP | 8.56 |
| IMO | IMPERIAL OIL LTD | 4.45 |
| ARX | ARC RESOURCES LTD | 4.23 |
| MEG | MEG ENERGY CORP | 2.16 |
| CPG | CRESCENT POINT ENERGY CORP | 2.02 |
| VET | VERMILION ENERGY INC | 1.85 |
| WCP | WHITECAP RESOURCES INC | 1.79 |
As of July 14, 2022, here is the sector weighting for XEG:
| Type | Fund (%) |
|---|---|
| Oil & Gas Exploration & Production | 59.02 |
| Integrated Oil & Gas | 39.45 |
| Oil & Gas Equipment & Services | 1.05 |
| Oil & Gas Drilling | 0.39 |
| Cash and/or Derivatives | 0.08 |
XEG is a high risk ETF:
Source: Blackrock.com
iShares XIC is an ETF that you can consider investing in if you want to track the overall Canadian stock market’s performance. iShares XIC allocates its funds to the top Canadian companies based on their market capitalization.
Unlike iShares XEG, iShares XIC diversifies across all Canadian economic sectors. To be specific, iShares XEG ETF holds 14 stocks, while iShares XIC ETF invests in a basket of over 200 companies. Clearly, you can count on a lot more diversity from iShares XIC.
iShares XIC ETF can be a viable alternative to iShares XEG ETF if you want broad exposure to the Canadian equity security market with lower risk tolerance.
You can find out more about iShares XIC in my full iShares XIC ETF review here.
Horizons HXE is another ETF to consider investing in if you want to track the Canadian energy sector’s performance.
It is an ETF product offered by Horizons and seeks to replicate the same index’s performance as iShares XEG. Hence, both the ETFs’ holdings are similar.
Take note, however, that while Horizons HXE has the same top ten holdings, its allocation towards individual assets may differ from iShares XEG’s in terms of weighting.
Another notable difference is that Horizons HXE has a substantially lower MER of 0.27% than iShares XEG ETF’s 0.61%. Lastly, Horizons HXE ETF was launched in 2013, making it significantly newer than iShares XEG.
Horizons HXE can be a viable alternative to iShares XEG because of its significantly lower MER.
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To learn more, check out my full breakdown of the best trading platforms in Canada.
If you want to invest in the energy market in Canada, then XEG might be a good ETF for you. However, it’s hard for me to recommend this due to its high MER.
You can check out some other energy ETFs here with lower MERs.
