The investment objectives of Enervest Diversified Income Trust (TSX:EIT.UN) are to maximize monthly distributions relative to risk and maximize net asset value, while maintaining and expanding a diversified investment portfolio. The company accomplishes this primarily through acquiring, investing, holding, transferring, disposing of, or otherwise dealing with or in equity and debt securities of corporations, partnerships, or other issuers and such other investments.
Rational investment objectives
Further, Enervest’s investment objectives are achieved through direct acquisitions, investments, or through exchange offers completed by Enervest from time to time. The assets of Enervest are invested in equity or debt securities, which include energy-related corporations and partnerships. These typically include investments in oil and gas, oil and gas services, industrial, propane, natural gas liquids, pipeline, production and handling facilities, and coal corporations.
The company also invests in resource-oriented corporations, real estate investment trusts (REIT’s), and any other corporation, partnership, or other issuers operating in an industry, as the manager may determine meets Enervest’s investment objectives. The fund also invests in a broad range of income-producing investments, including the securities of publicly traded REITs, and preferred shares of issuers engaged in businesses in various industries and geographic regions.
Income from these investments, including capital gains arising from capital appreciation, is used to support regular monthly distributions to unitholders and quarterly distributions to Series 1 preferred unitholders and Series 2 preferred unitholders. The fund’s portfolio manager is responsible for selecting members of securities exchanges, brokers and investment dealers for the execution of transactions in respect of Enervest’s investments and the negotiation of commissions in connection with the fund’s trades since Enervest is responsible to pay those commissions.
From time to time, the portfolio manager direct brokerage transactions involving Enervest’s brokerage commissions to a dealer in return for the provision of goods and services other than order execution. Brokerage business is allocated to dealers and brokers based on quality of service and the terms offered for specific transactions including price, volume, speed and certainty of execution, the competitiveness of commission terms and prices, the range of services, and the quality of research provided and total transaction cost.
In addition to order execution goods and services, dealers or third parties often provide research goods and services, which include advice as to the value of securities and the advisability of effecting transactions in securities, analyses and reports concerning securities, issuers, industries, portfolio strategy, or economic or political factors and trends. Such research goods and services are provided by the executing dealer directly or by a party other than the executing dealer, and include specific company and industry research reports — publications marketed to a narrow audience.
Investment strategy adherence
Principals of Enervest meet regularly to review the investment policies of the fund with respect to regulatory issues, sales practices, internal conflicts of interest and general business practices relating to the operations of the fund. There are no formal risk-management policies, practices, or guidelines; however, the fund is managed in accordance with the investment strategy and could turn out to be a very good investment over the long term.
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Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.