Intelligence

Canadian ETFs: Two new providers, two exits amid competitive atmosphere

In this research report created this week for The Globe And Mail, we look at Canadian ETFs: July’s launches and terminations.

Competition remains fierce in the Canadian exchange-traded fund industry. As two new ETF providers enter the market, two others announce their exits. The new market players introduced suites of innovation-focused ETFs and alternative funds.

Emerge Canada Inc. launched five actively managed thematic ETFs on NEO Exchange. They focus on innovative sectors including genomics and biotech, autonomous tech and robotics, AI and big data, and fintech. The suite will be subadvised by ARK Investment Management LLC, a New York-based firm specializing in disruptive innovation. ARK Investment Management is an award-winning ETF issuer that attracted more than US$2.8-billion in ETF assets under management. Each of Emerge’s ETFs comes in two different classes, Canadian dollar units (shown in the accompanying table – EARK, for example) and U.S. dollar units (EARK.U).

Another provider joined the market in July. Picton Mahoney Asset Management,a Toronto-based hedge fund manager, introduced exchange-traded class of units for its entire Fortified Alternative Fund family. The suite comprises alternative funds that invest in long and short positions in equities, derivatives, securities of investment funds, fixed income securities and/or cash and cash equivalents. In addition to management fees of 0.95 per cent, each Fortified ETF also charges outperformance fees tied to certain benchmarks.

Increased competition and the expanding product range make it difficult for small issuers to survive. For example, Coin Capital Investment Management Inc.announced that it will be terminating the Coincapital STOXX B.R.AI.N. Index Fund (THNK) and the Coincapital STOXX Blockchain Patents Innovation Index Fund (LDGR), thereby exiting the ETF industry, effective on or about Aug. 29.

First Block Capital Inc. is exiting the market by closing its only ETF, the FBC Distributed Ledger Technology Adopters ETF (FBCN), effective on or about Sept. 17. The blockchain ETF was up against similar ETFs from Horizons ETFs, First Trust Portfolios Canada and Harvest Portfolios Group.

Among the well-established fund providers,BMO Asset Management Inc. announced the termination of three ETFs: the BMO Global Banks Hedged to CAD Index ETF (BANK), the BMO Global Insurance Hedged to CAD Index ETF (INSR) and the BMO Shiller Select US Index ETF (ZEUS), effective on or about Nov. 1. Each of these ETFs has not attracted significant assets – less than $20-million in assets under management since their inception back in 2017.

Find the full report here

This article is written by Kimberly Yip Woon Sun,  ETF Analyst at Inovestor Inc.