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Kimberly Yip Woon Sun

FNB canadiens: lancements du mois d’avril

L’industrie canadienne des FNBs a atteint un nouveau sommet, avec un actif sous gestion de 178,7 milliards de dollars à la fin d’avril. Trois nouveaux FNBs ont été ajoutés à la gamme de produits au cours du mois.

LANCEMENTS DU MOIS D’AVRIL:

L’investissement dans le cannabis se trouve à un nouveau tournant avec la réintroduction d’une loi aux États-Unis qui permettra aux États de définir leurs propres politiques en matière de cannabis et de limiter l’interdiction au niveau fédéral. Deux fournisseurs de FNBs veulent exploiter ce marché en introduisant des FNBs axés sur les compagnies américaines de marijuana.

Evolve Funds a lancé le FNB Marijuana États-Unis Evolve («USMJ»). USMJ cherche à offrir une plus-value du capital à long terme en investissant activement dans un ensemble diversifié de titres de capitaux propres d’émetteurs qui exercent des activités dans le secteur de la marijuana aux États-Unis, où des lois étatiques et locales réglementent et autorisent ces activités. L’autre fonds axé sur le cannabis d’Evolve Funds, le Fonds marijuana Evolve («SEED»), était le FNB, coté sur la TSX le plus performant au Canada au cours de la dernière année avec un rendement total de 71,37%¹ en date du 30 avril 2019.

Après avoir lancer le premier FNB de marijuana au monde, qui a généré un actif sous gestion de plus de 920 millions de dollars, Horizons ETFs ajoute à sa gamme de FNBs axés sur le cannabis avec l’introduction du FNB Horizons Indice Marijuana États-Unis («HMUS»). HMUS cherche à reproduire, dans la mesure du possible, le rendement de l’indice US Marijuana Companies, déduction faite des frais. Cet indice vise à fournir une exposition au rendement d’un panier composé de sociétés de sciences de la vie nord-américaines inscrites en bourse qui exercent des activités d’exploitation importantes dans les secteurs américains de la marijuana ou du chanvre ou qui ont une exposition importante à ces secteurs. Le FNB est également disponible en dollars américains sous le symbole HMUS.U.

Le FNB Marijuana États-Unis Evolve et le FNB Horizons Indice Marijuana États-Unis se négocient sur la bourse Aequitas NEO.

¹Basé sur la classification Bloomberg de 491 FNBs cotés sur la TSX, en date du 30 avril 2019.

FNB – Article du G&M (en anglais)

 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.

Une gamme de produits en croissance

At the end of November, assets under management (AUM) stood at a record level of $145.9-billion, driven by net inflows of $3.3-billion, according to Yves Rebetez, managing director and editor of ETF Insight. The product shelf keeps on expanding and offers more investment choices. As the industry grows, the influx of market players accelerates. Two new providers joined the ETF market, with the number of market players now at 28.

Equium Capital Management Inc. entered the industry by launching ETF series of the Equium Global Tactical Allocation Fund (“ETAC”). The fund invests primarily in a mix of global equity securities, fixed income investments, derivative securities, and money market instruments. The ETF series units charge a management fee of 0.95%. The asset manager is a boutique investment management firm focused on global, multi-asset portfolio solutions.

Arrow Capital Management Inc. also joined the market through ETF series of the Exemplar Investment Grade Fund. Arrow Capital Management is an independent, employee-owned investment firm founded in 1999. It currently manages over CAD $1 billion of assets.

The industry is slowly becoming saturated, resulting in mergers and acquisitions among market players. This month, some of Questrade Wealth Management Inc.’s ETFs were merged into WisdomTree Asset Management Canada, Inc.’s ETFs as the acquisition, announced in July, come into effect.

Source: Questrade Wealth Management Inc.

Several other acquisitions are in the pipeline: Evolve Funds will acquire Sphere Investment Management Inc.’s ETFs and Sun Life Global Investments is set to take over Excel Funds’ ETFs.

NOVEMBER ETF LAUNCHES:

The Canadian industry has come a long way since the days investors would only hold core ETFs in their portfolios. These “core” are broad stock and bond index funds ideal for long-term investments. Today, investors’ demand for niche ETFs causes the product line-up of theme-driven and sector-specific ETFs to expand.

Source: Inovestor Inc.

The Mackenzie Global Leadership Impact ETF (“MWMN”) is the latest themed ETF launched. “The ETF seeks to provide capital growth by investing primarily in companies that promote gender equality and women’s leadership, anywhere in the world.” It is the second gender ETF offered in Canada. The Evolve North American Gender Diversity ETF (“HERS”) invests in North American equity securities that have demonstrated commitment to gender diversity as part of their corporate social responsibility strategy.

Niche ETFs allow investors to capitalize on macro trends. In November, Horizons unveiled one such investment solution, the Horizons Robotics and Automation Index ETF (“ROBO”). ROBO tracks the ROBO Global Robotics and Automation Index, an index designed to provide exposure to the performance of equity securities of robotics-related and/or automation-related companies. Other than conventional sectors like financial, energy and metal, the Canadian ETF space also covers the cyber security industry and even the marijuana industry.

FNB canadiens: les derniers lancements

AMALGAMATIONS AND NEW ETF LAUNCHES

By November 3, 2017

The surge of exchange-traded funds continues. Assets under management stood at $141-billion at the end of October, driven by strong net inflows. Evolve Funds announced that it will take over the ETF management contracts from Sphere Investment Management Inc. Amalgamations are to be predicted as the market gets progressively crowded. For instance, eight ETF sponsors joined the industry this year.

Evolve Funds entered into an agreement with Sphere to acquire the right to manage Sphere’s five ETFs with approximately $68-million in assets under management, subject to obtaining unitholder and regulatory approvals. Sphere’s ETFs are expected to continue to use a strategy that follows the Sustainable Yield Indices.

OCTOBER ETF LAUNCHES :

The Canadian product shelf is expanding and it is slowly deviating from the core, which was inherent in the rapid growth of the passive industry. 16 new ETFs were issued this month from RBC, BMO, Evolve Funds and Horizons.

BMO introduced five new ETFs. The BMO High Yield US Corporate Bond Index ETF (“ZJK”), started trading at the beginning of October and already attracted $1.18-billion in assets. It tracks the performance of the Bloomberg Barclays Capital U.S. High Yield Very Liquid Index. The ETF is also offered in CAD-hedged units under ZHY. The management fee on both ZJK and ZHY are 0.55% of NAV. BlackRock’s iShares U.S. High Yield Fixed Income Index ETF (“CHB”) tracks the same benchmark and charges only 50 basis points.

Horizons launched the Horizons Active A.I. Global Equity ETF (“MIND”), the World’s first global equity-focused ETF entirely run by a proprietary and adaptive artificial intelligence system. MIND seeks long-term equity returns through investments in major global equity indices using primarily North American-listed ETFs. “MIND is expected to be able to more efficiently process market data and allocate assets than any human manager,” said Steve Hawkins, President and co-CEO of Horizons ETFs. “Unlike today’s portfolio managers who may be susceptible to investor biases such as overconfidence or cognitive dissonance, MIND is devoid of all emotion. It is purely systematic in how it makes investment decisions.” Horizons has more ETFs in its pipeline.

On November 14th, Horizons ETFs Management (Canada) Inc. will launch its first multi-factor ETF, the Horizons Inovestor Canadian Equity Index ETF (“INOC“), sub-advised by Inovestor Asset Management. INOC seeks to replicate, to the extent possible, the performance of the Nasdaq Inovestor Canada Index (“NQICA“). The ETF charges a management fee of 0.50% of net asset value.

The Nasdaq Inovestor Canada Index was designed by Inovestor Inc., an affiliate of the sub-advisor. It uses a quantitative bottom-up model that systematically identifies companies with high levels of economic profit and attractive valuations ranked according to multiple factors, namely; profitability, growth, safety, management quality, reasonable valuations, and shareholders yield. The strategy has outperformed the S&P/TSX (TR) by 7.4% on average since 2008.

“This ETF is the result of our R&D on economic profit factors over the last decade and we selected industry leaders to increase our odds of succeeding with this investable product,” says Francois Soto, Vice-president, Portfolio Management at Inovestor Asset Management. For more information about INOC, please visit their website

FNB canadiens: les derniers lancements et les nouveaux joueurs

CANADIAN ETFS: THE LATEST LAUNCHES AND NEW MARKET PLAYERS

By October 4, 2017

Not a day goes by without hearing about exchange-traded funds, whether it be ETF launches or new market players joining the industry. September was one of the busiest months of 2017 so far, with 26 new ETFs and assets under management peaking at $135-billion. The market is increasingly saturated with 27 ETF providers, compared to only 17 for the same period last year. This month alone, three issuers entered the industry – PIMCO Canada, Evolve funds and Galileo Global Equity Advisors Inc.

PIMCO Canada issued ETF series of the PIMCO Monthly Income Fund (Canada) and the PIMCO Investment Grade Credit Fund (Canada). “We want to provide our Canadian investors with additional, convenient access points to two of our most popular bond strategies” said Stuart Graham, Managing Director and Head of PIMCO Canada. Pacific Investment Management Company LLC (PIMCO) is one of the world’s premier fixed income investment managers.

Evolve Funds differentiates itself by focusing on niche markets. Its goal is to bring innovative solutions to Canadian investors. Three of its four ETFs are thematic funds, covering gender diversity, future cars and cyber security. The fund manager recently filed to introduce a bitcoin ETF. U.S. regulators have rejected cryptocurrency ETFs until now. Will Canadian regulators approve the virtual currency ETF?

Galileo Global Equity Advisors Inc., advised by U.S. Global Investors Inc., launched the U.S. Global Go Gold ETF, a smart factor, passively managed fund that is designed to track the U.S. Global Go Gold and Precious Metal Miners Index. The index is designed to capture the performance of companies engaged in the production of precious metals and minerals.

Sun Life Global Investment will acquire Excel Funds and will overlook Excel’s ETF business. Excel Funds joined the industry in May with two global multi-asset ETFs. The funds have not appealed to many investors yet. Sun Life may have a better chance than Excel Funds in attracting assets with their well-established distribution channels.

Competition is also intensifying in the exchange market, which was a monopoly dominated by the TSX for a long time. 25 ETFs are currently listed on Aequitas NEO Exchange, compared to only one in 2016. The underdog has lured six ETF sponsors. Earlier this year, BlackRock switched the listing venue of 5 ETFs from TSX to NEO. BMO launched three U.S. Treasury bond ETFs on the exchange shortly after and just now, RBC introduced its first suite of broad base index ETFs on NEO.

The competitive landscape is driving fees lower. Asset managers race to offer more affordable investment solutions. For instance, Horizons is extending the 4 basis point (bps) rebate on the Horizons S&P/TSX 60 Index ETF (HXT). As such, the effective annual management fee on HXT continues at 3 bps, making it the world’s lowest-cost Canadian Equity ETF. Dynamic Funds and BlackRock Canada’s iShares reduced the management fee of the following ETFs:

Source: BlackRock Canada

Below is a list of ETF listings launched in September:

Source: Inovestor Inc.

FNB canadiens: les derniers changements de frais, les nouveaux produits et les résiliations

At the end of August, assets under management (AUM) of Canadian ETFs reached a new record of $133.9-billion, largely due to net inflows of about $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 ETF.

AUGUST LAUNCHES OF NEW ETFS

TICKER NAME DATE ASSET CLASS
TXF.B-T First Asset Tech Giants Covered Call ETF August 29, 2017 Equity
RWX-T First Asset MSCI International Low Risk Weighted ETF August 23, 2017 Equity
RWX.B-T First Asset MSCI International Low Risk Weighted ETF August 23, 2017 Equity
REM Redwood Emerging Markets Dividend Fund August 23, 2017 Equity
EHE.B-T WisdomTree Europe Hedged Equity Index ETF August 10, 2017 Equity

Source: Inovestor Inc.

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 $50-million, the iShares BRIC Index ETF will also be terminated. It is yet another red flag suggesting market saturation of ETFs. 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.

AUGUST TERMINATIONS OF ETFS

TICKER NAME DATE
XCR-T iShares Conservative Core Portfolio Builder Fund September 27, 2017
XGR-T iShares Growth Core Portfolio Builder Fund September 27, 2017
XGC-N iShares Global Completion Portfolio Builder Fund September 27, 2017
XAL-N iShares Alternatives Completion Portfolio Builder Fund September 27, 2017
XBZ-T iShares MSCI Brazil Index ETF September 27, 2017
CBQ-T iShares BRIC Index ETF September 27, 2017
CBQ-AX iShares BRIC Index ETF September 27, 2017

Source: Inovestor Inc.

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 per cent and 0.15 per cent from 0.15 per cent and 0.20 per cent, 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 Sept. 5. The ETFs were 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.

BMO INDEX CHANGES FOR AUGUST

TICKER CURRENT INDEX NEW INDEX NEW NAME
ZEB-T S&P/TSX Equal Weight Diversified Banks Index Solactive Equal Weight Canada Banks Index BMO Equal Weight Banks Index ETF
ZMT-T S&P/TSX Equal Weight Global Base Metals CAD Hedged Index Solactive Equal Weight Global Base Metals Canadian Dollar Hedged BMO Equal Weight Global Base Metals Hedged to CAD Index ETF
ZGD-T S&P/TSX Equal Weight Global Gold Index Solactive Equal Weight Global Gold Index BMO Equal Weight Global Gold ETF
ZIN-T S&P/TSX Equal Weight Industrials Index Solactive Equal Weight Canada Industrials Index BMO Equal Weight Industrials Index ETF
ZEO-T S&P/TSX Equal Weight Oil & Gas Index Solactive Equal Weight Canada Oil & Gas Index BMO Equal Weight Oil & Gas Index ETF

Source: BMO Asset Management Inc.

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 is offering 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.

Kimberly Yip Woon Sun is an ETF analyst with Inovestor Inc.