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Emerge Canada Inc. founder and chief executive officer Lisa Langley has no regrets about launching five new women-led, sustainability-themed exchange-traded funds (ETFs) during the depths of last year’s bear market.
“I still think it was a really good move,” says Ms. Langley, pointing to the relatively strong performance of the new funds since their launch in September, which she attributes to the firm’s active management style run by experienced women money managers.
“It’s our kind of market … because we have active managers who have a long track record of picking stocks and adding alpha,” Ms. Langley says. “They’ve done it before in other difficult markets.”
In September, Emerge launched five EMPWR ETFs with an environmental, social and governance (ESG) focus. One of those five is Emerge EMPWR Unified Sustainable Equity ETF EPWR-NE, a combination of the four individual EMPWR ETFs focusing on dividend yield, equity growth, and global and emerging markets. That ETF is up 2.5 per cent year-to-date, as of March 7, and has risen around 3 per cent since its launch on Sept. 9, according to Morningstar Inc. data.
Ms. Langley’s company also has six Emerge ARK ETFs, five launched in 2019 and one in 2021, subadvised by Cathie Wood’s ARK Investment Management LLC.
The Globe spoke recently with Ms. Langley about her firm’s investing style and some of the companies it has been buying and selling in its women-led funds:
Describe your investment style:
Emerge is an advocate of active management and strong fundamental analysis across a variety of asset classes. Our portfolio managers and subadvisors have a record of being able to hang in during difficult markets. We also have a sustainability overlay and approve and review every stock submitted for investment, including among our subadvisors.
What’s your take on the current market environment?
I think we’re in an earnings recessionary environment. Last year, companies were adjusting to higher input costs and trying to maintain their margins. This year, they’re adjusting to higher labour costs and trying to maintain margins. In some cases, companies are beating earnings expectations but lowering guidance because they don’t feel they can do it again in the near term. As a result, some companies are being pummelled in the markets.
That said, we still have this tremendously strong labour market. As long as the job market hangs in there, I don’t think we’ll see a severe recession but instead more of a soft landing. I don’t ascribe to the view that the markets are going down by another 10 per cent or so this year. I think there will be a narrow trading band for the rest of the year, and 2024 will be better.
What have you been buying or adding?
We see a lot of global and emerging market opportunities as a longer-term play. An example is Novozymes A/S NVZMY, a Denmark-based biotech company that we just bought in our EMPWR Sustainable Global Core Equity ETF EPZA-NE. It’s not just biotech. It covers different categories in industrial development such as agriculture, forest products and wastewater solutions. It also has a female CEO, Ester Baiget, as well as 50 per cent management diversity and 30 per cent board diversity.
Another recent buy was financial services company City Holding Co. CHCO-Q, which we bought in our EMPWR Sustainable Select Growth Equity ETF EPGC-U-NE. City Holding is a high-quality U.S. bank with a US$1.4-billion market cap. It trades at a premium to the large U.S. banks and is an attractive acquisition target. It has a very smart management team that has proven that size doesn’t guarantee superior stock performance. Its stock price has beaten the mega caps on a 5-year basis and even a 20-year basis.
What have you been selling or trimming?
Some of our recent exits include Novocure Ltd. NVCR-Q in our EMPWR Sustainable Select Growth Equity ETF. We sold Novocure because, in this environment, we think it will be very difficult for growth-oriented, speculative, high-multiple companies to succeed. We also sold Abbvie Inc. ABBV-N in our Emerge EMPWR Sustainable Dividend Equity ETF EMCA-A. Abbvie achieved our relative price target following its outperformance relative to a stronger outlook on the Humira decline. We decided to swap it for Pfizer Inc. PFE-N, which declined sharply following its recent earnings. We saw that as a buying opportunity.
What advice do you have for new investors?
Make sure you’re allocating your investments based on the time frames that you’ll need them for, whether short-term for something like buying a home or long-term for retirement. For example, I think global and emerging markets are good options for longer-term growth for an investor that doesn’t have shorter-term liquidity needs. On the other hand, if you’re looking for something steadier, if you’re not 100-per-cent sure of your timeline, then large-cap dividend stocks could be a good space to look at because you do have a buffer with the distributions that, in some cases, can smooth over some of the market volatility.
Also, we obviously like some disruptive innovation names given our ARK funds, but those are suitable for just a small portion of an investor’s portfolio. Investors need to be careful that they’re not overallocating to the flavour of the day and that allocations are based on their risk tolerance and the purpose of the particular investment.
This interview has been edited and condensed.
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