powered by GlobeinvestorGold.com

Rob Carrick

In this Issue

Trusts look good, on the surface

Rob Carrick

Life was so simple during the last bear market income trusts were the trusty friend of retail investors and pretty much everything else was the enemy.

The markets have been wickedly volatile over the past 18 months or so, recalling the dark days of 2001-2002. Alas, income trusts have not reprised their role as the investor's saviour. A few trusts have stood up bravely against the latest market decline, but you have to work to find them.

Trusts look good on the surface, mind you. The S&P/TSX capped income trust index was off 4.1 per cent for the year through Sept. 19, while the S&P/TSX composite index dropped a nasty 13.7 per cent. But the trust returns are somewhat distorted by the dominance of energy trusts, which account for close to two-thirds of the capped income trust index. Energy, as well all know, has been one of the hotter sectors in the past year or so. Aside from Fording Canadian Coal Trust, all of the Top 10 year-to-date performers in the trust index were all energy trusts as of mid-September.

If you dig down a bit, though, you'll find some other trusts that fared well in falling markets and offer the potential of stable returns looking forward. Here are a few of them:

A lot of investors lost interest not to mention money in trusts when the federal government announced a new tax on distributions that will take effect in 2011. But the trust market soldiers on for now and, if you look closely, you'll find some names that have held up nicely in the recent stock market volatility. Investors who remember the go-go days for trusts in the last bear market may not be satisfied by this, but smart investors are always on the lookout for shelter in a storm.

Rob Carrick has been writing about personal finance, business and economics for more than 12 years.

Back to top