Canada may already have a slew of big-name players in its $100-billion-plus market for exchange-traded funds, but WisdomTree Investments wants in as well. The American ETF provider is officially launching six Canadian ETFs Thursday on the Toronto Stock Exchange.
"They're very much focused on the U.S. market and the international market," said Raj Lala, head of WisdomTree Canada, which opened its Canadian office earlier this year.
Here are the company's new products (some funds have two tickers based on the fee structure):
WisdomTree Europe Hedged Equity Index ETF (EHE);
WisdomTree U.S. Quality Dividend Growth Index ETF (DGR/DGR.B);
WisdomTree International Quality Dividend Growth Index ETF (IQD/IQD.B);
WisdomTree U.S. High Dividend Index ETF (HID/HID.B);
WisdomTree International Quality Dividend Growth Dynamic Hedged Index ETF (DQI);
WisdomTree U.S. Quality Dividend Growth Dynamic Hedged Index ETF (DQD).
The company said they are all self-indexed and constructed based on strategy, research dividend perspectives and coverage ratios that take into account a company's future potential for dividend growth.
The company also utilizes a "smart beta strategy" for its ETFs that sit between active and passive. Mr. Lala said WisdomTree sees a significant amount of potential in the Canadian market for this type of product, which he estimated is currently about 10 per cent to 11 per cent of the total ETF market. "In the United States, smart beta ETFs make up about $400-billion of the $2.1-trillion ETF [market]," he said. "We definitely have a lot of room for growth."
With the introduction of upcoming regulatory changes for fee transparency – known as CRM2 for the second phase of the client relationship model – Mr. Lala said he believes more advisers will migrate their business to a more fee-based model. This will also encourage more investors to pick up ETFs that have lower fees than mutual funds.
The company said the choice to list on the TSX as opposed to alternatives such as the Aequitas Neo stock exchange was due to the stronger visibility of the more established bourse for dealers. "It's been the more widely adopted route for the ETF business and other businesses," Mr. Lala said.
Mr. Lala said the focus on the United States, Europe and other international markets was also based on updated trends showing increased investor interest in acquiring more assets outside of Canada. "Right now we probably have one of the highest home-country biases in the world," he said, estimating 55 per cent to 65 per cent of Canadian assets are held in domestic securities. "It makes sense from a diversification perspective and also from a risk-adjustment return perspective to access other markets."
As for why customers should go with WisdomTree as opposed to competitors such as Vanguard, BMO Global Asset Management or Blackrock's iShares, Mr. Lala said the parent company is one of the top 10 ETF firms in the world and is purely focused on ETFs. Many of WisdomTree Canada's products are also currency-hedged. "I think it should really resonate in the Canadian marketplace because more investors are focused on the impact of currency fluctuations on their portfolios and the difficulties of trying to time the market as it relates to currencies," he said.
And for any investors concerned about WisdomTree's Europe Hedged Equity Index ETF being affected by Britain's vote to leave the European Union, Mr. Lala said the ETF has little exposure to the country. "It's focused on companies that are generating 50 per cent or more of their revenues from outside of Europe," he said. "So really the bigger multinational organizations, which hopefully results in insulation from the downturn in the market."
With files from Clare O'Hara and Tim Kiladze