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Canadian ETFs: June’s Launches and Terminations

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. 

Canadian ETFs: May’s Launches

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.

Canadian ETFs: April’s Launches and Terminations

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 classurge, 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 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. 

 

Canadian ETFs: March’s Launches and Terminations

The Canadian ETF Industry ended the first quarter of 2021 with assets under management of $278 billion. The number of new ETF listings keeps on increasing with 23 new listings added in March. 

RBC iShares expanded its Sustainable ETFs suite with three ESG Leaders ETFs. These ETFs currently seek to track MSCI indices that are designed to provide efficient exposure to companies demonstrating more sustainable business practices relative to their industry peers, while providing sector balance and market coverage. The ETFs can be used as sustainable equity building blocks for the core of a portfolio. 

Desjardins also launched an ESG ETF. The Desjardins RI Emerging Markets – Low CO2 Index ETF (“DRME-T”) complements the range of ETFs designed to significantly reduce carbon intensity relative to traditional equity indices. Under normal market conditions, the Fund will primarily invest in large and mid-cap companies from the Scientific Beta Emerging Markets Universe while seeking to deliver a significant reduction in the weighted average carbon intensity of the Fund’s portfolio and ensuring that all Constituent Issuers meet Pre-Determined ESG Standards. 

Emerge Canada Inc. introduced Canada’s first space exploration ETF, sub-advised by ARK Investment Management LLC. The Emerge ARK Space Exploration ETF is an actively-managed exchange-traded fund that invests in global equity securities of companies that are or, are expected to be, focused on leading, enabling, or benefitting from technologically enabled products and/or services that occur beyond the surface of the Earth. Its top holdings, as of March 31st, are Trimble Inc. (“TRMB-Q”)Kratos Defence and Security (“KTOS-Q”) and L3harris Technologies Inc. (“LHX-N”). 

CI First Asset launched the cheapest bitcoin ETF, in terms of management fee. The CI Galaxy Bitcoin ETF is the World’s third bitcoin ETF. Interest in the cryptocurrency space is acceleratingThe first bitcoin ETF has already hit a billion dollars in assets under management in less than two months of tradingHorizons ETFs even came out with an inverse bitcoin ETF on April 15th for investors who want a short exposure to bitcoin.

Horizons ETFs, Harvest ETFs and Accelerate Funds have reorganized their product suite and terminated the following ETFs in March: 

BlackRock Canada lowered the management fees on its core Canadian Fixed Income ETFs, effective April 1st.

Canadian ETFs: February’s Launches and Terminations

At the end of February, the Canadian ETF Industry reached a new record high of $270 billion in assets under managementThe number of ETFs listed in Canada continues to grow as we welcome the World’s first Bitcoin ETF. Once more, Canadian regulators prove to be more accepting of disruptive investment products. In the U.S, approximately ten Bitcoin ETFs have either been rejected or are still waiting approval by the SEC. Will the success of the Canadian-listed Bitcoin ETFs pave the way for our U.S. counterparts? 

In only two days of trading, the Purpose Bitcoin ETF attracted over $420M in assets under management. It will invest directly in physically settled Bitcoin, not derivatives, allowing investors easy and efficient access to the emerging asset class of cryptocurrency without the associated risk of self-custody within a digital wallet. The ETFs charge management fees of 1% each. 

Shortly after, Evolve Funds Group introduced the Evolve Bitcoin ETFIn order to compete, Evolve slashed the management fee on its Bitcoin ETF from 1% to 0.75%. Several other providers have plans to join the Bitcoin ETF frenzy, including CI Global Asset Management that only charges 0.40% in management fee. In less than a month of trading, Bitcoin ETFs are shaking the investment community and a fee war is already taking place. The next race is who will launch the World’s first Ethereum ETF. Evolve Funds Group and CI Global Asset Management have already filed preliminary prospectus and are waiting for approval. 

In other new launchesSmartBe introduced a suite of Canadian and U.S. Factor-based investing ETFs. The “value” investment style behind the SmartBe U.S. Quantitative Value Index ETF (SBQV-NE) and the SmartBe Canadian Quantitative Value Index ETF (SBCV-NE) emphasizes investing in securities that are considered undervalued, based on quantitative analysis compared to other securities. The “momentum” style of investing underpinning the SmartBe U.S. Quantitative Momentum Index ETF (SBQM-NE) and the SmartBe Canadian Quantitative Momentum Index ETF (SBCM-NE) emphasizes investing in securities with higher recent total return performance than other securities.

As part of its commitment to helping investors reach their long-term goals, TD Asset Management reduced the management fees on six of its broad market index TD Exchange-Traded Funds. After these management fee reductions, the TD ETFs will be among the lowest priced broad market index exchange-traded funds in Canada.

Canadian ETFs: January’s Launches and Terminations

The Canadian ETF industry reached $260 billion in assets under management at the end of January. The Canadian ETF product line-up continues to expand. New solutions consist mostly of thematic ETFs to cater to changing investor needs.

In the ESG space, Harvest ETF and BMO both launched a clean energy ETF. The Harvest Clean Energy ETF (HCLN-T) invests in a portfolio of the 40 largest Clean Energy Issuers selected from the Clean Energy Investable Universe that are listed on select North American, European and developed Asian stock exchanges and are categorized as renewable energy or renewable energy generation. The BMO Clean Energy Index ETF (ZCLN-T) seeks to replicate the performance of the S&P Global Clean Energy Index, net of expenses. The S&P Global Clean Energy Index is based on the S&P Global Broad Market Index, which includes large, mid and small capitalization companies across developed and emerging markets. The Index aims to capture the performance of companies whose primary business is clean energy, by way of clean energy production or clean energy equipment & technology.

Evolve ETFs introduced Canada’s first Cloud Computing ETF. The Evolve Cloud Computing Index Fund (DATA-T) focuses companies that are directly involved in the cloud computing industry in developed markets. Cloud computing is a technology which allows users to take advantage of computing services, storage space, and processing power through the internet, without the need for their own hardware and software. The global pandemic has increased digitization and the demand for cloud computing services.

Horizons ETF launched the world’s first psychedelic ETF, Horizons Psychedelic Stock Index ETF (PSYK-NE). It provides exposure to North American publicly-listed life sciences companies focussed on psychedelic medicines, and other companies with business activities in the psychedelics industry. In less than a month since its launch, the ETF already reached approximately $52 million in assets. “We launched the world’s first Cannabis-focused ETF in 2017, the Horizons Marijuana Life Sciences Index ETF (HMMJ-T), and we see many similarities between that industry in 2017 when it was in its infancy to the psychedelics industry now. We see the potential for significant growth from this new sector like what we have witnessed with the Cannabis industry during the last few years.” said Mr. Hawkins, President and CEO of Horizons ETFs. “At Horizons ETFs we strive to be at the forefront of key global transformative investment themes. We believe the opportunities with psychedelics not only provide a compelling investment case, but also the potential to provide life-changing impact for those suffering with mental illness.”

Source: Inovestor Inc.

Canadian ETFs: A look at December’s launches and terminations – and how the industry grew in 2020

INDUSTRY REVIEW
The Canadian ETF industry reached $257 billion in assets under management at the end of November, compared to $205 billion one year ago, for an annual growth rate of 25.4%. ETFs reported record inflows of $40 billion this year representing 19.5% of the AUM at the beginning of the year. In the last 5-year period, the ETF industry passed from $89.6 billion to $257 billion for an annual growth rate of 23.5%.

Thematic ETFs were popular this year. ESG ETFs saw inflows of $1.8 billion compared to the last record set in 2018 of approximately $750 million. The number of ESG ETFs created during the year was 49, bringing the number at year-end to 58. Innovation was another major theme. Emerge, a thematic ETF provider, was able to take full advantage of this trend by increasing its assets under management from $10M to $204M as a result of the $157M inflow.

In the last few years, asset allocation ETFs have made a breakthrough for investors who want simplicity. Since their introduction in 2018, they collectively provided an inflow of approximately $100 million each month. 13 out of 39 ETF providers offer asset allocation ETFs.

NEW LAUNCHES
December was rather quiet in terms of launches which is not unusual. Only Horizons launched a new ETF. The Horizons Tactical Absolute Return Bond ETF takes long and short positions in debt instruments and derivatives, primarily North American, across the entire credit spectrum in order to provide positive absolute returns with low volatility in any environment.

Interest in bitcoin has returned strongly as a result of the impressive rise in price. For bitcoin enthusiasts, there is no bitcoin ETF yet, but there are other structures. Honourable mention to the CI Galaxy Bitcoin Fund (BTCG.UN & BTCG.U) managed by CI Investments and structured as a limited partnership (LP) that started operations on December 16.

Canadian ETFs: November’s Launches and Terminations

INDUSTRY REVIEW
The Canadian ETF industry reached $249 billion in assets under management at the end of November compared to $200 billion one year ago for an annual growth rate of 24.5%. The number of ETFs continued to grow as our Canadian ETF database has surpassed the 1000 mark including all classes. This number includes more than 800 unique ETFs.

NEW LAUNCHES
It is TD’s turn to launch new ESG ETFs. The geographic location is standard: Canada (TMEC-T), U.S. (TMEU-T) and international (TMEI-T). TD is not here to play around with management fees of 0.10%, 0.15% and 0.20% for the respective ETFs. They are one of the most competitive ETFs in terms of fees in the ESG space in Canada. As the ESG AUM continues to grow, we expect fees to decline as operational costs reduce as a percentage of AUM.

Ninepoint joined the group as an ETF provider in Canada, although it is not new to the asset management industry. It will offer some of their funds as an ETF series. Investors have access to a new ETF that works like a saving account (NSAV-NE), a precious metals ETF focusing on gold (GLDE-NE), a mining sector ETF focusing on silver (SLVE-NE), and a different way to invest in corporate bonds with Ninepoint Diversified Bond Fund (NBND-T).

Manulife has launched 3 fixed income ETFs that should cover the basic needs for investors. Manulife Smart Short-Term Bond ETF (TERM-T) invests in short-term securities in Canadian corporations based on its current holdings. The low maturity is perfect for short-term objectives while providing higher yield than a government bond ETF. Manulife Smart Core Bond ETF (BSKT-T) is a standard Canadian bond universe that every investor should own. It is mostly investment grade, but the manager has the possibility to invest in higher yielding securities. Manulife Smart Corporate Bond ETF (CBND-T) gives exposure to the Canadian corporate bond universe and is diversified across sectors. Manulife has also launched one Canadian (CDIV-T) and one U.S. (UDIV-T) ETF focusing on high paying and sustainable dividend stocks.

Canadian ETFs: Increased Competition Lead To Lower Fees And An ETF Provider To Exit The Industry

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

As competition is getting increasingly fierce, the cost of ETFs is becoming lower and lower. An ETF provider announced that it is exiting the ETF market by selling its Canadian ETF subsidiary to another sponsor.

CI Financial Corp., the parent company of CI Investments which manages the CI First Asset Exchange-Traded Funds, will acquire WisdomTree’s Canada ETF business. Upon completion of the transaction, CI will add 14 TSX-listed ETFs with $958 million in assets (as of November 4, 2019) to its current ETF family. The WisdomTree Canada ETFs will be rebranded CI WisdomTree ETFs and WisdomTree will continue as the index provider for the WisdomTree Canada ETFs that currently track WisdomTree’s proprietary indexes. WisdomTree Canada also announced that it will be terminating WisdomTree U.S. High Dividend Index ETF on or about January 31, 2020.

The race to lower fees continues as investors are more aware of the effect of fees on their returns. Vanguard cut the management fee on one of its largest equity ETFs, the Vanguard FTSE Global All Cap ex Canada Index ETF (“VXC”), by five basis points from 0.25% to 0.20%. In addition, Vanguard has also reduced the total cost of ownership with the VXC by simplifying the structure to remove a second layer of taxation with a lower withholding rate.

Horizons ETFs also announced that it lowered the management fees on three of its technology sector ETFs and its ESG ETF by up to 23 basis points.

Source: Inovestor Inc.

In new launches, IA Clarington introduced Active ETF Series for three additional mandates, the IA Clarington Floating Rate Income Fund (“IFRF”), IA Clarington Global Allocation Fund (“IGAF”) and IA Clarington Strategic Income Fund (“ISIF”). Active ETF Series provide access to the same strategies, exposures and portfolio managers as iA Clarington’s standard mutual fund series, but in an investment that trades like a stock.

Source: Inovestor Inc.

IFRF seeks to generate a stream of current monthly income by investing primarily in senior floating rate loans, other floating rate securities and debt obligations of investment grade and non-investment grade North American and global corporate issuers.

IGAF combines a concentrated global equity portfolio with a high conviction U.S. and global fixed income allocation. Security selection is driven by bottom-up fundamental research. Managers look for valuation disparity in the market place to position the portfolio where the greatest risk/reward opportunities lie, which typically runs counter to macro trends.

ISIF seeks to provide a consistent stream of income and capital appreciation by investing primarily in Canadian equity and fixed income investments. The fund may invest up to 49% of its assets in foreign securities.

Find the full report here

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

Wave of new products hits ETF market

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

The Canadian ETF industry ended September with assets under management of $188-billion. A wave of new products was launched during the month and three providers announced ETF closures.

New additions include two alternative ETFs from AGF Investments, the AGFiQ US Market Neutral Anti-Beta CAD-Hedged ETF (“QBTL”) and the AGFiQ US Long/Short Dividend Income CAD-Hedged ETF (“QUDV”). Each of the ETFs charges a management fee of 0.55%.

QBTL seeks performance results that correspond to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Thematic Market Neutral Anti-Beta Index (CAD-Hedged). The index is market neutral and sector neutral – meaning the number of long and short positions in each sector in the index approximate the weighting of that sector in the index universe. It is designed to capture the spread return between the long positions on low-beta companies and short positions on high-beta companies.

QUDV seeks performance results that correspond to the price and yield performance, before fees and expenses, of the Indxx Hedged Dividend Income Currency-Hedged CAD Index, a sector neutral index which is designed to measure the performance of a strategy utilizing three portfolios: long positions on high dividend paying companies, short positions on no or low dividend paying companies, and a long position in the Indxx Cash Index.

The industry is saturated with over 700 ETFs in the Canadian universe, ETFs that are not lucrative are being terminated or merged with other funds. For instance, as a result of a purchase and sale agreement, whereby Hamilton ETFs will acquire the management contract of Purpose Global Financials Income Fund (“PFG”), PFG will merge into the Hamilton Australian Financials Yield ETF (“HFA”), effective on or about October 25, 2019.

Source: Inovestor Inc.

As investors are increasingly aware of effects of fees on their returns, asset managers are lowering fees to stay competitive. Mackenzie Investments slashed fees on its traditional index ETF suite by up to 10bps, making these ETFs among the most affordable ones in their respective categories.

Source: Inovestor Inc.

Find the full report here

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