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Kimberly Yip Woon Sun

Canadian ETFs: January’s launches and terminations

 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.

Read the full report here.

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

Canadian ETFs: December’s launches and terminations

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

Despite December’s volatility spike and stock-market gains for the year completely wiped out, the industry’s AUM grew from $147.1-billion at the end of 2017 to $156.8-billion at the end of 2018, according to data from the Canadian ETF Association (CETFA). 2018 has been a hectic year and we saw trends that contributed to the ascending of the Canadian ETF market:


More than a hundred ETFs were launched in 2018, including some innovative products like Vanguard’s ETF suite that provides a single-fund portfolio solution to investors according to their risk tolerance. Thematic ETFs were also among the popular products launched last year. They cover themes such as blockchain, artificial intelligence and environmental, social and governance (ESG). These new ETFs make investing more accessible, whether it is through a one-stop fund or through themes that investors believe in.


The competitive market drove down fees. In 2018, 35 ETFs had their management fee reduced by two to 35 basis points (bps). Horizons even launched zero-per-cent-management-fee ETF portfolio solutions. In Canada, exchange-traded funds remain considerably cheaper than their mutual fund counterparts. Investors slowly turn to these cheaper solutions as they become aware of the impact of fees on their return.


Last year, nine ETF issuers joined the market, bringing the total count of providers to 33. The new players include Scotiabank, one of the five largest banks in Canada, and iA Clarington, whose parent company is Canada’s fourth-largest life and health insurance company. Asset managers are joining the ETF bandwagon at a time when asset flows are moving away from traditional mutual funds toward ETFs. Unfortunately, not all of them are able to make the transition. Five sponsors exited the industry, which were mostly through acquisition by bigger players. For instance, WisdomTree Investments acquired Questrade ETFs, Evolve Funds took over Sphere Investments’ ETFs, Redwood Asset Management was amalgamated into Purpose Investments and Sun Life Global Investments acquired Excel Funds before exiting the market altogether.

While we expect some of the above trends to persist into the new year, the following catalysts will likely have an impact on the industry in 2019:


Liquid alternatives are available to retail investors as of Jan 3, 2019. Liquid alternatives (or liquid alts) are funds that aim to provide diversification and downside protection through exposure to alternative investments. Up until now, alternative strategies were limited to institutional or high-net-worth individuals due to their complex nature. Several liquid-alts ETFs – for example, NBI Liquid Alternatives ETF and Desjardins Alt Long/Short Equity Market Neutral ETF – are waiting to be approved by regulators.


The Canadian ETF product lineup has increased significantly over the past few years. Some of the new ETFs have been very lucrative, attracting more than $300-million in AUM in less than a year of existence, while others did not attract enough assets to break even. Profit to an issuer is determined as a percentage of assets invested in the ETF. ETFs without enough AUM to cover costs will presumably be terminated.


While the industry remains heavily concentrated, the market share of the three largest ETF sponsors plunged from 86.8 per cent to 78.2 per cent over a three-year period in December. In 2019, the arrival of new entrants like National Bank Investments and CIBC will cause even more disruption. We are also anticipating consolidations and exits during the year. BlackRock Canada and RBC Global Asset Management, the first and fifth largest ETF providers, already announced that they are being brought together under one new brand – RBC iShares.

Read the full report here.

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


Canadian ETFs October’s Launches And Terminations

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

The Canadian ETF space is getting crowded with more than 650 ETFs offered by 33 ETF issuers. This month, iA Clarington Investments joined the industry with the active ETF series of IA Clarington Core Plus Bond Fund, iA Clarington Global Bond Fund and iA Clarington Emerging Markets Bond Fund. Two new providers are set to join the ETF industry in 2019.

National Bank Investments filed a preliminary prospectus to launch its first suite of ETFs. It consists of four ETFs: an active Canadian preferred shares ETF, an ETF that invests in equity securities of family-owned Canadian companies, a global real estate and infrastructure sectors ETF and a liquid alternatives ETF. Management fees for this suite range from 35 to 90 basis points.

Middlefield Group, a Specialty Investment Manager which creates and manages specialized investment products for individual and institutional investors, will convert two closed-end funds into exchange-traded funds. Middlefield Healthcare & Life Sciences Dividend Fund and REIT INDEXPLUS Income Fund, which together represent approximately $150-million in assets, are expected to be converted into ETFs in early 2019.

Find the full report click here 

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

Canadian ETFs – September’s Launches and Terminations

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

Four asset managers entered the Canadian ETF Industry this month: Fidelity Investment, Coin Capital Investment Management, Starlight Capital and First Block Capital.

Fidelity’s first suite of ETFs consists of six divided-factor ETFs covering the Canadian, U.S. and international markets. The funds seek to replicate Fidelity’s in-house indices that are based on three dividend factors: dividend yield, payout ratio and dividend growth for FCCD, FCUD, FCUH and FCID. A fourth factor, correlation to 10-year U.S. Treasury yields, is considered for FCRR and FCRH.

Find the full report click here  

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