At the end of August, Canadian ETFs’ AUM reached a new record of $133.9 Billion, largely due to the month’s net inflows approximating $3 Billion. First Asset expanded their suite of MSCI Index-based ETFs to include RWX, which seeks exposure to stocks across 21 Developed Markets, excluding the U.S. and Canada. Redwood Asset Management launched its first active emerging market ETF.
BlackRock will terminate six ETFs in September. XCR, XGR, XGC, XAL and XBZ are BlackRock’s lowest AUM ETFs, excluding ETFs less than 1 year old. Despite reasonable assets of around $50M, the iShares BRIC Index ETF will also be terminated. It is yet another red flag suggesting market saturation. Funds that do not attract enough AUM to cover costs will presumably be on the ETF deathwatch. Currently, more than 50 ETFs in the Canadian industry do not satisfy the break-even criteria. While large asset managers can cover costs for loss-making ETFs with their Billion Dollar Club ETFs, other providers may have to exit the industry because their ETFs are not profitable.
ETF asset managers are taking advantage of the sluggish summer to revamp their product suites:
Desjardins aligned management fees on DCS and DCG to BlackRock’s XSB and CLF, the lowest fees charged for Canadian Short Term Bond ETFs and 1-5 Year Laddered Government Bond ETFs. New management fees on the Desjardins Canadian Short Term Bond Index ETF (DCS) and the Desjardins 1-5 year Laddered Canadian Government Bond (DCG) are 0.09% and 0.15% from 0.15% and 0.20%, respectively. iShares has the first mover advantage and the reputation. Will aligning management fees be enough to lure investors?
BMO announced index changes to the following ETFs, effective on September 15, 2017. The ETFs was previously replicating S&P’s equal weight sector indices and will now track Solactive AG’s indices. It’s not the first time that BMO is switching to Solactive indices. In 2016, BMO replaced Dow Jones indices by Solactive indices for ZRE, ZUB, ZUH and ZUT. The competitive environment could be pushing ETF Issuers to lower cost in order to provide more cost-effective solutions.
First Trust AlphaDEX Canadian Dividend ETF (FDY) is proposed to merge into the First Trust Canadian Capital Strength (FST), upon approval of unitholders. The proposal will provide several benefits to FDY’s unitholders, including broader market exposure, greater liquidity and tax losses.
Redwood Asset Management announced an exchange offering for the ETF units of the Redwood Canadian Preferred Share Fund. Investors may purchase units of RPS by tendering eligible securities of Exchange Eligible Issuers. The list is available here.
What we’ve been reading elsewhere
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National Bank Direct Brokerage eliminates commissions for all ETFs listed in the US
Credits: ETF Insight, ETF Issuers and CETFA
