Presented by the Canada UK Chamber of Commerce.
Margeta Hricova: Welcome to ETF TV – your insight into the world of exchange traded funds, issuers and investment. I am Margareta Hricova and joinging me today is Daniel Straus, director of ETF Research, National Bank of Canada, and Deborah Fuhr.
Welcome to the show.
Daniel Straus: Thank you.
Deborah Fuhr: Thank you.
Margeta Hricova: So today we’ll be giving a quick preview of what people can hear and learn about at the upcoming Financial Services Forum that’s covering the global ETF evolution, given by Canada & The United Kingdom Chamber of Commerce, on November 22nd at 4:30pm, GMT.
Deborah Fuhr: I’m excited to be moderating a session with Daniel Straus. Daniel is well known in Canada, but for those of you in Europe who may not know him, daniel, can you share a little bit of your background, please?
Daniel Straus: I’m an exchange traded fund analyst. I head up a team of four fellow analysts and associates at National Bank of Canada Financial Markets. National Bank of Canada is Canada’s sixth largest bank out of six. But we very much punch above our weight when it comes to the analysis of ETFs, I like to think, as well as trading and market making. I’ve been doing this for 11 years, analyzing Canadian, US and global ETFs full-time, and there’s been a lot of changes.
Deborah Fuhr: That’s great. And so why should Europeans be interested in learning about what’s happening in Canada? Maybe you can talk about some of the firsts that many people might not be aware of that came out of Canada?
Daniel Straus: Canada really has been a trailblazer in the world of ETFs. The first ETF in the world has its antecedent in what is now known as XIU – the Toronto Index 60 ETF in Canada. It was originally the Toronto Index Participation Unit, launched in 1990, fully three years before SPY, the first ETF in the United States. But it’s also the site of the world’s first fixed income ETF. The first two bond ETFs were launched in Canada, as well as the first currency hedge ETFs. And more recently there’s, you know, the first Marijuana Index ETF available in Canada, the first physical Bitcoin and other cryptocurrencies ETFs. So, you know, the landscape is exploding. The majority of ETFs in Canada, have launched in the last four or five years. There’s over a thousand of them, and there’s quite a lot worth looking into.
Deborah Fuhr: And the other thing that’s unique about Canada that I think many would find interesting, and we’ve been debating here in Europe, is the ability to do non-transparent active.
Daniel Straus: Yeah, absolutely. Another surprising element of the Canadian ETF landscape is the fact that over 25% of the assets are in what might be described as actively managed funds. And there’s a whole spectrum of these. In the United States and elsewhere around the world, ETFs are synonymous with purely passive and very transparent index investing.
But in Canada, the active ETFs run the whole gamut. There are some that follow quantitative methodologies that are run in-house. Others have, let’s say, an options overlay that is active, but the underlying basket is not active for additional yield. And then there are some that are pure, traditional, stock picker active. And that’s because within Canada, the regulatory framework has basically adopted what was already present for mutual funds and allowed them to be listed on the exchange in continuous distribution.
And in fact, in Canada, the line between ETFs and traditional funds is a little bit blurry. So there’s a lot of very traditional, highly active, high conviction, even hedge fund style exchange traded funds in Canada that are really not available elsewhere.
Deborah Fuhr: So Europeans, why should they care about buying something in Canada? What’s the benefit?
Daniel Straus: The market is continually increasing and growing. So if you’re looking for a particular Canadian exposure and according to our economists, there’s many reasons to be seeking that out, especially at a time of kind of global uncertainty, emerging from a pandemic, a world of growing inflation, a world of increasing commodity prices. There are many reasons to want to invest in Canada directly with our very resource-based economy, not just energy resources, but base materials and so on.
So a Canadian equity index should be under the microscope for almost any global asset manager. And if you’re going to do that, an ETF listed in Canada is very likely going to be the cheapest, most liquid, most efficient way for you to get that exposure. But if you wanted to branch aside from that, the many Canadian ETFs that are within other asset classes, commodities, crypto assets, fixed income as well, or just active management, long short strategies, the varieties endless.
You know, when I started 11 years ago, the AUM – the assets under management in Canada was about $40 billion and there were maybe 100 and some ETFs. I surveyed the landscape and I said, ‘this is amazing. There’s more than enough here for anybody to make any kind of portfolio they wish.’ Now we’re at over 300 billion Canadian AUM and well over a thousand ETFs. And I’m still not sure that’s enough. There’s products being launched every day, and it really does keep us very busy.
Deborah Fuhr: That’s definitely a good incentive for people to sign up and join us to hear insights from you. In addition, Patrick McEntyre is going to be speaking to Steve Hawkins, Presidency of Horizons ETFs. Kevin Gopaul, the president and chief commercial officer at BMO Exchange Traded Funds, and Greg Taylor, chief investment officer at Purpose Investments.
So please do register and join us November 22nd, from 4:30 to 5:30pm GMT. Registration is free and the link is below.
We look forward to seeing you there. Thank you.
ETF TV news does not provide investment advice, nor recommend products.