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||Strategy||Mgt. Fee||Exchange|
|TXF.B-T||First Asset Tech Giants Covered Call ETF||August 29, 2017||Equity||Active||0.65%||TSX|
|RWX-T||First Asset MSCI International Low Risk Weighted ETF||August 23, 2017||Equity||Passive||0.60%||TSX|
|RWX.B-T||First Asset MSCI International Low Risk Weighted ETF||August 23, 2017||Equity||Passive||0.60%||TSX|
|REM||Redwood Emerging Markets Dividend Fund||August 23, 2017||Equity||Active||0.90%||NEO|
|EHE.B-T||WisdomTree Europe Hedged Equity Index ETF||August 10, 2017||Equity||Passive||0.55%||TSX|
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 $50-million, the iShares BRIC Index ETF will also be terminated. It is yet another red flag suggesting market saturation of ETFs. Funds that do not attract enough AUM to cover costs will presumably be on the ETF deathwatch. Currently, more than 50 ETFs in the Canadian industry do not satisfy the break-even criteria. While large asset managers can cover costs for loss-making ETFs with their Billion Dollar Club ETFs, other providers may have to exit the industry because their ETFs are not profitable.
August Terminations of ETFs
|Ticker||Name||Date||Asset Class||Strategy||Net Assets (As of Aug. 31) ($ Mil)|
|XCR-T||iShares Conservative Core Portfolio Builder Fund||September 27, 2017||Multi-asset||Active||$8.23|
|XGR-T||iShares Growth Core Portfolio Builder Fund||September 27, 2017||Multi-asset||Active||$11.24|
|XGC-N||iShares Global Completion Portfolio Builder Fund||September 27, 2017||Multi-asset||Active||$9.13|
|XAL-N||iShares Alternatives Completion Portfolio Builder Fund||September 27, 2017||Multi-asset||Active||$14.16|
|XBZ-T||iShares MSCI Brazil Index ETF||September 27, 2017||Equity||Passive||$14.62|
|CBQ-T||iShares BRIC Index ETF||September 27, 2017||Equity||Passive||$54.25|
|CBQ-AX||iShares BRIC Index ETF||September 27, 2017||Equity||Passive||$3.15|
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.