Ninepoint Energy Fund (NNRG): Is Eric Nuttall’s Active Management Worth It?

Eric Nuttall is one of Canada’s most recognized energy bulls. He is a Partner and Senior Portfolio Manager with Ninepoint Partners LP, having joined the firm in 2017 after more than a decade at Sprott Asset Management.

Nuttall began his career as a Research Associate in 2003, later becoming an Analyst, Associate Portfolio Manager, and ultimately Portfolio Manager in 2010. His market commentary is regularly featured on BNN Bloomberg, CNBC, The Globe and Mail, and The National Post, and he is well known for his trademark phrase “we remain bullish.”

Nuttall has built his reputation on deep expertise in small- and mid-cap energy companies, a focus that carries over into his portfolio management style. That expertise is available to investors through the Ninepoint Energy Fund (NNRG), one of the few actively managed Canadian-listed energy ETFs.

The fund gives TSX energy bulls a way to potentially outperform benchmarks through concentrated, research-driven stock selection. The trade-off is cost - NNRG is far from cheap compared to index-tracking alternatives.

For investors who want to bet big on Canadian energy, the key question is whether Nuttall’s active approach is worth the price. Here’s my take.

How NNRG works

NNRG is an actively managed ETF, which means it does not follow an index. Instead, Eric Nuttall and his team select stocks based on both company-level analysis and their broader outlook for the energy sector. This blend of bottom-up research and top-down macro views creates a portfolio that looks very different from the average TSX energy allocation.

Rather than being dominated by large-cap producers like Canadian Natural Resources or pipelines such as Enbridge, NNRG leans heavily into mid-cap names. The fund also has flexibility to invest in U.S.-listed stocks when opportunities arise and can hold cash if conditions don’t warrant full exposure.

A key benefit often highlighted is the team’s deal flow and strong relationships across the energy industry. This access allows Nuttall to evaluate opportunities not widely available to passive investors and to move quickly when valuations become attractive.

The trade-off is cost. NNRG charges a 1.5% base management fee plus a 10% performance fee on returns above the S&P/TSX Capped Energy Total Return Index, a structure more common to hedge funds than ETFs. According to its latest fact sheet, the combined fees translated to a management expense ratio (MER) of 1.79% as of May 16, 2025. Turnover is also high, reflecting the fund’s active approach.

Even though NNRG isn’t designed as an income product, it often pays sizable annual distributions due to realized capital gains and dividends collected. The most recent payout, on December 31, 2024, amounted to $2.8816 per share, equal to a 9.56% yield. For investors holding outside of registered accounts, those taxable distributions are an important consideration.

NNRG versus index ETFs

Looking at the following cumulative total return chart, all three funds – NNRG, the iShares S&P/TSX Capped Energy ETF (XEG), and the BMO Equal Weight Oil & Gas ETF (ZEO) delivered decent returns in the 2022–2025 period.

NNRG finished with a 157.1% total return, slightly lagging XEG at 159.8% and ahead of ZEO at 138.6%. These returns are net of MERs. To me, that suggests Eric Nuttall’s active bets neither significantly added nor detracted relative to a simple cap-weighted approach over this window after accounting for fees.

The drawdown chart provides additional context. NNRG consistently experienced sharper drawdowns than both XEG and ZEO, which is consistent with its mid-cap tilt. Mid-caps tend to be more volatile and sensitive to swings in commodity prices.

XEG also had significant concentration risk with nearly half the portfolio in Canadian Natural Resources and Suncor. ZEO showed the most stable drawdown profile, benefiting from equal weighting that spreads risk more evenly and adds a rebalancing bonus during volatile cycles.

Taken together, the data suggests that NNRG has delivered comparable long-term performance to a low-cost index tracker like XEG, but with higher volatility. ZEO has lagged slightly in raw returns but handled downturns better thanks to its diversification.

Is NNRG a good investment?

Assuming you’re already comfortable with Canadian energy exposure, NNRG can be, but with asterisks. The core trade-off is whether Eric Nuttall’s active style and mid-cap focus are worth higher costs and more volatility.

If we stripped out the 1.5% management fee and the 10% performance fee on returns above the benchmark, NNRG’s results would have looked stronger. But those fees exist, and at the end of the day, that’s what matters to investors—Ninepoint got paid, and investors took home what was left.

From my perspective, a fairer incentive structure would look more like what Picton Mahoney uses with their alternative funds: a lower base management fee of around 0.95% per year, plus a 20% performance fee above the benchmark. Ideally, that would include a 2% hurdle rate and a perpetual high-water mark, which ensures fees are only paid when investors see true excess gains.

None of this takes away from Nuttall’s expertise. He is one of the most respected energy managers in Canada, and I’ve personally benefited from his insights. But the performance data above shows that NNRG investors would have ended up with nearly the same long-term results as index alternatives like XEG, while paying significantly higher fees and enduring higher volatility.

That suggests investors betting on NNRG are paying for the chance that future cycles will reward Nuttall’s style, but so far, the evidence is mixed.