Stepping out of its traditional investment banking and trading role, GMP Capital Inc. announced it has developed a new oil and gas index for small and mid-cap oil and gas companies.
The idea was born out of a conversation between managing director Wade Felesky and his brother Adam, chief executive officer for Horizons Exchange Traded Funds. Because GMP is a big name in the oil and gas space, Mr. Felesky (Wade, that is) thought it would be beneficial to have an index dedicated to the small to mid-cap players that are sometimes overlooked for powerhouses like Suncor Energy.
A few months later, the investment dealer has its very own GMP Junior Oil & Gas Index. To put it together, GMP enlisted the help of Standard & Poor's, which now takes over responsibility for rebalancing the index and making sure it operates in the same manner as the Toronto Stock Exchange's energy subindex.
GMP's index tracks oil and gas companies listed on the TSX that range in market capitalization from $100-million to $3-billion. This focus ties directly into the dealer's strategy to win more business, because the more liquidity there is in these names, the easier it is for them to raise money and do deals.
And that's where Horizons comes in. Now that the index is up and running, BetaPro has set up an ETF that tracks it. In an ideal world, investors will flock to this fund, which will increase the amount of money sloshing for these names.
As for how the index works, the members are weighted by market capitalization and no single company can be worth more than 10 per cent. At market open Tuesday Progress Energy Resource Corp. had the biggest weighting at 7.7 per cent, followed by Blackpearl Resources Inc. at 7.2 per cent.
To find the index, search for GMPOG on Bloomberg and Reuters, and MPO/Y-CM on ThomsonOne.