In this research report created this week for The Globe And Mail, we look at Canadian ETF’s: January’s launches and terminations
Three new ETF providers entered the industry in January. CIBC Asset Management introduced a suite of two actively-managed fixed income ETFs and two multifactor equity ETFs, which seek to replicate CIBC’s in-house indices. The indices consider the following factors in selecting equity securities: low volatility (low sensitivity to market fluctuations), quality (high profitability and low financial leverage), value (low price to earnings and price to book), and high price momentum characteristics.
SmartBe Wealth Inc. launched the SmartBe Global Value Momentum Trend Index ETF (SBEA) listed on NEO exchange. The ETF tracks the Alpha Architect Value Momentum Trend for Canada Index, which is based on three factors: value, momentum and trend-following. The index is designed by Alpha Architect LLC, a research-intensive asset management firm that delivers concentrated factor exposure.
National Bank Investments Inc. joined the herd of ETF sponsors with the launch of four ETFs. Its initial suite includes the NBI Active Canadian Preferred Shares ETF (NPRF), the NBI Canadian Family Business ETF (NFAM), the NBI Global Real Assets Income ETF (NREA) and the NBI Liquid Alternatives ETF (NALT). NALT’s investment objective is to provide a positive return while maintaining low correlation to, and lower volatility than, the return of the global equity markets. The ETF will seek to achieve this objective by investing primarily in long and short positions on financial derivatives that provide exposure to different major asset classes, such as government bonds, currencies, equities or commodities.
Another ETF Issuer has filed a preliminary prospectus to issue liquid alternatives ETFs. Accelerate Financial Technologies Inc., established by a team with a track record of successfully managing award-winning hedge funds, intends to launch a suite of exchange traded alternative funds.
Accelerate’s initial suite consists of the Accelerate Absolute Return Hedge Fund (HDGE), the Accelerate Enhanced Canadian Benchmark Alternative Fund (ATSX) and the Accelerate Private Equity Alpha Fund (ALFA). The ETFs’ fee structure will be similar to that of hedge funds. They have a 0% management fee and will only earn a performance fee if they outperform their high-water mark. For instance, HDGE will charge a performance incentive fee of 20% of the excess NAV in between quarters, ATSX’s performance incentive fee is 50% of the positive amount by which ATSX’s performance exceeds the performance of the S&P/TSX 60 TR Index for the quarter and ALFA will charge a performance incentive fee of 15% of the excess NAV in between quarters.