Kimberly Yip Woon Sun

The Canadian industry’s assets under management grew to $336 billion in November. The product line-up expanded with the addition of Cryptocurrency ETFs, Metaverse ETFs and many more.

Amid high market volatility, low volatility ETF solutions were introduced in the Canadian industry. CIBC Asset Management launched a low volatility dividend suite for income-seeking investors who prefer equity-based exposure with reduced volatility. Manulife also introduced two new actively managed Manulife Smart Defensive Equity ETFs, aimed at providing better investor experiences in volatile markets.

In other launches, Purpose Investments Inc. added to their cryptocurrency line-up with the World’s first covered call and actively managed cryptocurrency ETFs: Purpose Bitcoin Yield ETF, Purpose Ether Yield ETF, and Purpose Crypto Opportunities ETF.

Purpose Bitcoin Yield ETF and Purpose Ether Yield ETF seeks to provide unitholders with monthly distributions and long-term capital appreciation. The funds will achieve its investment objectives primarily by obtaining exposure to Bitcoin or Ether, respectively, and by implementing a derivatives-based strategy in respect of portfolio securities. Purpose Crypto Opportunities ETF, the world’s first actively managed cryptocurrency ETF, seeks to provide unitholders with long-term capital appreciation by investing primarily in digital assets and securities that provide exposure to digital assets.

In September, the Canadian ETF Industry reached $319 billion in assets under management. New products launched this month include Canada’s first multi-cryptocurrency ETF and leveraged ETFs with exposure to Canadian REITs. 

Evolve Funds Group introduced the Evolve Cryptocurrencies ETF (“ETC-T”), designed to provide investors with one convenient way to obtain exposure to bitcoin and ether, on a market capitalization basis, through an ETF structure. The ETF will provide exposure to bitcoin and ether by investing in Evolve’s Bitcoin (“EBIT-T”) and Ether (“ETHR-T”) ETFs. ETC charges no management fees, however, the underlying investment funds held by the Fund will pay management fees. Currently, the management fees on EBIT and ETHR are 0.75% of net asset values, plus applicable sales taxes. 

Horizons ETFs launched two new ETFs that provide leveraged and inverse leveraged exposure to the Canadian Real Estate Investment Trusts sector, an industry classification comprised of owners, operators and managers of residential, commercial and industrial properties. Investors can invest those views on either the long or short-side of the Canadian REIT sector without taking on the high costs of using margin, borrowing or shorting directly. 

The BetaPro Equal Weight Canadian REIT 2x Daily Bull ETF seeks daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to two times (200%) the daily performance of Solactive Equal Weight Canada REIT Index. The BetaPro Equal Weight Canadian REIT –2x Daily Bear ETF seeks daily investment results, before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to two times (200%) the inverse (opposite) of the daily performance of the Solactive Equal Weight Canada REIT Index. 

In this article written for The Globe And Mail, we look at Canadian ETFs: August’s launches.

The Canadian ETF industry product line-up continues to expand with innovative ETFs. Sustainable fixed income ETFs and inflation-protected ETFs were introduced. An ESG-friendly bitcoin ETF was also added to the market.

Accelerate Financial Technologies Inc. introduced the World’s first carbon-negative bitcoin ETF. Bitcoin ETFs have attracted over $3 billion in assets under management. With all the major central banks still using quantitative easing and pumping money supply, investors continue to pour money in bitcoin due to its limited supply. However, its big carbon footprint has been a major concern for investors.

The Accelerate Carbon-Negative Bitcoin ETF gives exposure to bitcoin while reducing its carbon footprint. Accelerate works with a leading third-party to execute a global tree-planting campaign to sequester carbon emissions and help fight climate change. Up to 10% of ABTC’s 0.69% management fee will be allocated to Accelerate’s annual tree-planting campaign. The initial decarbonization initiative will be focused on planting mangrove trees in Madagascar. For each $1,000 investment in ABTC, approximately one net tonne of carbon dioxide is expected to be sequestered per year.

RBC iShares expands its sustainable ETF platform and fixed income lineup with the addition of four ETFs. The new sustainable ETFs, iShares ESG Advanced 1-5 Year Canadian Corporate Bond Index ETF and iShares ESG Advanced Canadian Corporate Bond Index ETF, provide exposure to the Canadian dollar investment grade corporate bond market, and currently seeks to track indexes that are designed to provide efficient exposure to companies demonstrating more sustainable business practices relative to their industry peers, while also excluding issuers from industries with elevated sustainability-related risks.

The new U.S. fixed income ETFs – the iShares U.S. Aggregate Bond Index ETF and iShares U.S. Aggregate Bond Index ETF (CAD-Hedged) – provide exposure to the U.S. dollar-denominated investment grade corporate bond market.

There were no ETF terminations in August.

In July, the Canadian ETF Industry reached $313 billion in assets under management. New Fixed Income ETFs and ESG ETFs were added to the product line-up. 

RBC iShares expanded its Fixed Income line-up with the addition of five new ETFs. “With the launch of these new ETFs, RBC iShares continues to deliver high quality fixed income strategies to support portfolio construction, helping advisors and investors meet their long-term investment objectives. With both low interest rates and inflation top of mind today, these new ETFs give investors additional tools to diversify their fixed income portfolios, enabling easy access to U.S. corporate bonds and inflation-linked bonds,” said Steven Leong, Head of iShares Product, BlackRock Canada. 

The iShares U.S. IG Corporate Bond Index ETF, iShares 1-5 Year U.S. IG Corporate Bond Index ETF and iShares 1-5 Year U.S. IG Corporate Bond Index ETF (CAD-Hedged) provide exposure to the U.S. dollar-denominated investment grade corporate bond market. The iShares 0-5 Year TIPS Bond Index ETF and iShares 0-5 Year TIPS Bond Index ETF (CAD-Hedged) provide exposure to inflation-indexed U.S. Treasury bonds with remaining maturities of less than five years. 

CIBC Asset Management launched a suite of Sustainable Investing ETFs that provide access to actively managed strategies that seek to align with the investing values of socially responsible investors. 

The CIBC Sustainable Investment Solutions are designed to align investors’ wealth with a values-based approach focused on responsible investing. The solutions also aim to have a lower carbon footprint and energy sector exposure than broad market indices, and employ positive sector screening for companies involved in the renewable energy space and green bonds. The products utilize CIBC Asset Management proprietary ESG analysis and portfolio construction methodology in conjunction with customized screening from Sustainalytics. 

Desjardins terminated its suite of Multifactor-Controlled Volatility ETF on July 28, 2021. 

The Canadian ETF industry keeps on expanding, reaching $308 billion in assets under management at the end of the second quarter. Most new inflows poured in sector ETFs during the first half of the year. In June, eleven new products, including ESG and themed ETFs, were added. 

Franklin Templeton Canada partnered with boutique Investment Managers with proven Sustainability expertise to list a suite of Sustainable investing ETFs. This sustainable ETF suite comprises of a global fixed income ETF, that strives for attractive income generation and total return while guarding against downside risks, a global infrastructure active ETF, which invests in equity securities of sustainable issuers supporting infrastructure assets, and an international growth ETF, which invests in equity securities of sustainable issuers outside the U.S. and Canada. Franklin Templeton Canada will launch two more sustainable ETFs covering emerging markets and global equity markets in July. 

Adding to the ESG trend, Horizons ETFs issued Canada’s first ETF focused exclusively on providing exposure to a portfolio of global green bonds – a type of fixed-income instrument that raises capital for projects with specific environmental objectives or benefits. The Horizons S&P Green Bond Index ETF seeks to replicate the performance of the S&P Green Bond U.S. Dollar Select Index, net of expenses. The Index seeks to measure the performance of global green-labelled bonds issued in U.S. dollars that are subject to stringent eligibility criteria to fund projects that have positive environmental or climate benefits. 

Horizons ETFs also introduced a range of themed ETFs covering the global semiconductor space, global lithium producers and global hydrogen space for the first time in Canada. 

The Horizons Global Semiconductor Index ETF tracks the performance of the Solactive Capped Global Semiconductor Index, designed to provide exposure to the performance of global, publicly listed companies engaged in the production and development of semiconductors and semiconductor equipment. The Horizons Global Lithium Producers Index ETF tracks the performance of Solactive Global Lithium Producers Index, designed to provide exposure to the performance of global, publicly listed companies engaged in the mining and/or production of lithium, lithium compounds, or lithium related components. Horizons Global Hydrogen Index ETF tracks the performance of the Solactive Global Hydrogen Industry Index, designed to provide exposure to the performance of global, publicly listed companies engaged in the development and production of fuel cell technology and equipment, as well as infrastructure, components, and systems for hydrogen generation, storage, and transportation. 

At the end of May, the Canadian ETF Industry reached assets under management of $297 billion. The ETF product line-up keeps on expanding with new ESG and sector ETFs, including Canada’s first Shariah-compliant ETF. 

Wealthsimple launched the Wealthsimple Shariah World Equity Index ETF. The ETF excludes companies deriving more than 5% of their income from alcohol, tobacco, pork-related products, weapons, conventional banking or insurance companies, and adult entertainment. It also excludes companies with excessive leverage. It currently seeks to replicate the performance of the Dow Jones Islamic Market Developed Markets Quality and Low Volatility Index. The ETF and its underlying index have been certified by a team of Islamic researchers at Ratings Intelligence Partners, and dividend purification information is made available quarterly. 

Also in the ESG space, Evolve Funds added new ETFs that bring carbon neutrality to traditional indices. Its CleanBeta suite strives to decarbonize the core of investor portfolios. The Evolve S&P/TSX 60 CleanBeta Fund and the Evolve S&P 500 CleanBeta Fund seek to provide long-term capital growth by replicating, net of fees and expenses, the performance of the S&P/TSX 60 Index and S&P 500 Index, respectively, while striving to offset the carbon footprint of the constituent securities in the portfolio. To achieve this, Evolve will rely on a carbon footprint calculation provided by the S&P Dow Jones Indices utilizing Trucost to determine the carbon exposure of the companies in the indices. The ETFs will employ a variety of strategies, including purchasing and retiring carbon credits, as a means to neutralize the full carbon footprints.

Cryptocurrency flooded the Canadian ETF market this month with fifteen ETF listings. The World’s first Ethereum ETFs hit the industry on April 20th. Shortly after, multiple other providers issued their own Ether ETF, some racing to attract investors by waving management fees. 

Investors can choose between CI Galaxy Ethereum ETF, Evolve Ether ETF, Purpose Ether ETF and the 3iQ CoinShares Ether ETF. CI Galaxy waived the full 0.40% management fee on the ETF until June 15, 2021 while Evolve ETFs waived the full 0.75% management fee on the Ether ETF until May 31, 2021. Purpose Ether ETF and 3iQ CoinShares Ether ETF each charge management fees of 1%. 

As interest in this asset class surge, Horizons ETFs introduced the BetaPro Bitcoin ETF (“HBIT-T”) and the BetaPro Inverse Bitcoin ETF (“BITI-T”). HBIT and BITI provide long and short exposure to Bitcoin through the use of futures contracts and derivatives. These instruments cater to investors who want to bet on the direction of the volatile digital coin. HBIT charges a management fee of 1% and BITI charges a management fee of 1.45%. 

In other new launches, Horizons ETFs introduced the Horizons Global BBIG Technology ETF (“BBIG-T”). The ETF tracks the Solactive Global BBIG Index, which is designed to provide exposure to the performance of publicly listed large-cap and mid-cap global equities in the following industries: secondary battery, biotechnology, internet, and gaming – represented by the acronym, BBIG. 

CI Global Asset Management has merged the following ETFs:

Unitholders of each Terminating ETF have received units of the Continuing ETF based on the stated exchange ratio, as set out in the table above, for each unit of the Terminating ETF held as at April 16, 2021.