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ETF INNOVATION Wealth Professional Canada takes a closer look at the emerging themes that are driving the ETF space
GIVING BACK MADE EASY
Expert advice on managing your clients’ charitable giving
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INVESTING FOR THE GREATER GOOD A new way to meet client demand for socially responsible investments
THE TARIFF TIPPING POINT
How worried should advisors and investors be about a trade war?
21/09/2018 8:31:48 AM
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ISSUE 6.08
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CONTENTS
@WealthProCA facebook.com/WealthProCA
UPFRONT 02 Editorial
Where will ETFs go from here?
04 Head to head
22
Have tech darlings lost their appeal?
06 Opinion
Why today’s advisors must be able to relate to all members of a family
FEATURES
INVESTING FOR A BETTER TOMORROW
26
Horizons ETFs’ new offering capitalizes on the trend toward socially responsible investing
INDUSTRY ICON
How real is the trade-war threat?
12 Intelligence
Taking advantage of trading liquidity to bolster ETF performance
16 Alternative investment update
PEOPLE
46
TIME TO GET ACTIVE
Harvest Portfolios’ Paul MacDonald outlines his firm’s active approach to ETFs
Blake Goldring relies on the leadership lessons he picked up from the Canadian Forces to lead AGF in an uncertain landscape
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10 News analysis
14 ETF update
INNOVATION AND EVOLUTION IN ETFs
PEOPLE
How legal cannabis could reshape the investment landscape
This month’s big movers and shakers
SPECIAL REPORT
From thematic and factor-based products to the ongoing race to cut management fees, WPC takes a deep dive into the latest trends shaping Canada’s ETF industry
08 Statistics
Venture capital soars to new heights
FEATURES 51 Jump into e-commerce
Industrial REITs offer a safe foothold in the e-commerce boom
54 Declaring independence
What’s behind Nour Private Wealth’s move to independence
PEOPLE 52 Advisor profile
Francis Sabourin on the key to winning clients’ trust
63 Career path
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FEATURES
THE BENEFITS OF PLANNED GIVING How to help your clients’ charitable donations have more impact
Rebecca Horwood’s career has been nothing short of trailblazing
64 Other life
Advisor and soccer coach Tony De Thomasis’ winning strategy
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21/09/2018 10:28:15 AM
UPFRONT
EDITORIAL wealthprofessional.ca
Can ETFs keep growing?
T
he ETF market continues to be one of the hottest topics in the investment industry. After reporting that 2018 opened with the best-selling first quarter on record, the Canadian ETF Association recently revealed that ETF sales declined in the second quarter. However, despite the lower sales, assets grew by 3.4% in the quarter, bringing the AUM of ETFs in Canada to $163.7 billion as of the end of August. That’s up from $133.8 billion in August 2017. BlackRock continues to have the largest AUM with $60.4 billion, followed by BMO Asset Management at $50.7 billion and Vanguard Canada with $17.5 billion.
Although some believe the market is nearing a saturation point, it would appear that the ETF industry isn’t even close to reaching its full potential And it’s not just AUM that continues to grow: 105 new ETFs were launched over the past 12 months, bringing the total to 621 funds. In addition, four new providers entered the ETF space, which is now 28 players strong. Investors are also starting to see more product options. Factor-based and thematic ETFs have been popping up, giving investors the chance to put their money behind things that resonate with them. Meanwhile, socially responsible investing [SRI], which promotes things like gender equality and environmental stewardship, allows investors to promote their values with their ETF investments. Although some believe the market is nearing a saturation point, it would appear that the ETF industry isn’t even close to reaching its full potential. As the growth story continues, expect to see more entrants in the SRI sector and even more competition on the management fee front. This month’s cover story highlights many of the innovative new products available to investors and the changes the industry has witnessed so far. As the ETF space in Canada continues to evolve with more innovative products coming to market, WPC will be here to bring you in-depth coverage. The team at Wealth Professional Canada
ISSUE 6.08 EDITORIAL
SALES & MARKETING
Managing Editor Joe Rosengarten
Director, Client Strategy Dane Taylor
Editor Darren Matte Writers James Burton Libby MacDonald Leo Almazora Executive Editor Ryan Smith Copy Editor Clare Alexander
CONTRIBUTORS Jamie Suprun Amantha Imber Anna O’Dea
ART & PRODUCTION Designer Pia Marie Tandog Production Manager Alicia Chin Traffic Manager Ella Dayandante
Sales Executive Alan Stewart General Manager, Sales John Mackenzie Project Coordinator Jessica Duce
CORPORATE President & CEO Tim Duce Office/Traffic Manager Marni Parker Events and Conference Manager Chris Davis Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil Global COO George Walmsley Global CEO Mike Shipley
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21/09/2018 8:33:12 AM
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02-03_Editorial-SUBBED.indd 3
21/09/2018 8:33:20 AM
UPFRONT
HEAD TO HEAD
Is it time to move clients away from FAANG stocks? Facebook, Apple, Amazon, Netflix and Google have long been the market’s tech darlings – but are they no longer safe bets?
Arthur C. Salzer
CEO and CIO Northland Wealth Management
Senior investment advisor and vice-president JMRD Wealth Management Team
Reg Jackson
Kimberley Short
“The FAANGs’ outperformance over the past decade has left huge pockets of the market undervalued. A cyclical change is beginning to occur, and investors are seeking potentially higher future returns from value stocks. From a risk management perspective, it’s wise to rebalance and therefore take profits, as we see the outperformance of growth stocks beginning to come to an end. On the subject of value, emerging markets are very attractive, and valuations are preferable to Western markets. These markets have not outperformed for the past decade, and they are poised to do better going forward.”
“One of our top holdings and performers is Amazon. Currently, Amazon is up 60% for the year and hitting new highs regularly. Should this name pull back in any meaningful way, we would consider that an opportunity to add to the position. Amazon continues to fire on all cylinders with a growth rate that is unmatched by the other mega-cap companies; we expect its growth profile to continue. We own other FAANG names through ETFs. JMRD continues to like technology, and we feel that these ETFs provide excellent one-stop shopping for certain exposures and would continue to be buyers on weakness.”
“Many investors focus their attention on sectors that have risen significantly recently. This is understandable because everyone loves a good story. However, we have to be aware that financial headlines often miss the big picture. Attention to such gains or losses is one form of recency bias. We ensure that our clients keep FAANG stocks and other sectors in proper perspective; accordingly, we have included some of these stocks in our portfolios over the last number of years. As with any stock, the underlying fundamentals have to be sound, which, with many of the FAANG stocks, eliminates them from consideration.”
Portfolio manager HollisWealth
SHADES OF DOT-COM MANIA? Facebook, Apple, Amazon, Netflix and Google – the cadre of tech companies collectively known as FAANG – have spent much of this decade as the most popular and bestperforming tech stocks. The five, which currently account for 10% of the S&P 500, are on the cusp of setting a record for the market’s longest bull run. Yet as Facebook struggles with high-profile controversies and Netflix misses new-subscriber targets, “the theme that has started to emerge ... is that we have reached a saturation point among the FAANG stocks,” Michael Antonelli, managing director of institutional sales trading at US-based financial services firm Robert W. Baird, told Reuters in July.
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04-05_Head to Head-SUBBED.indd 4
21/09/2018 8:34:06 AM
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21/09/2018 8:34:13 AM
UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email wealthprofessional@kmimedia.ca
Advising across generations Providing holistic advice requires being able to speak candidly to all members of a family, writes Jamie Suprun I ALWAYS SAY to my clients in our first meeting: “I want to be your first phone call when you have a question.” The reason is simple: The onus is on advisors to take a holistic approach for the entire family. We don’t just deal with investments – sometimes we act as psychologists (when markets get volatile), sometimes marriage counsellors (when the tough questions haven’t been asked), sometimes family planners (when the tough questions haven’t been answered), and most of all as sounding boards for kids, parents and grandparents. We listen, speak candidly and form a plan to ensure the entire family is treated equally and fairly. It’s becoming more and more important to be able to talk candidly to the entire family about estate planning, wealth transfer, tax planning, spending habits and overall financial health. I’ve been seeing more and more family clients (grandparents, parents and kids) and have noticed a lack of financial education for the next generation. These young adults (18 to 25 years old) are either not informed, or don’t care be informed, about the family wealth transfer. But this generation is going to see a massive amount of wealth transferred down to them, and they will need to know how to deal with it. Probably one of the most pertinent topics to this cohort is education and postsecondary schooling. In my experience, rarely
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does the family have a cost/benefit discussion about what happens after college or university. Parents seem to completely miss the fact that there needs to be a return on your postsecondary investment, and the choice of degree or diploma needs to be one of the very first
about marriage, children and what their wishes are. There’s no easy way of asking these questions of either the kids or the parents, so being direct and to the point is crucial. I have had adult children in to discuss the importance of marriage contracts and why they are helpful in estate planning. These can be extraordinarily uncomfortable questions, but once it is fully explained, the ‘pre-nup’ isn’t so demonized. At the other end of the spectrum is the ongoing wealth transfer between baby boomers and their parents. These parents were often savers who lived through the war or perhaps even the Depression. More and more, I’m seeing that when a client or parent of a client passes away, their family has no idea how much money they had socked away. In some cases, it’s truly astounding. Recently, I had a client in his 70s whose parents had just passed away. The client was under the impression that his parents were poor; indeed, the client was paying some of their expenses. Once the estate was settled and cleaned up, there were more than $2 million in assets at different banks, credit unions and investment firms. (Probably the most important point in
“This generation is going to see a massive amount of wealth transferred down to them, and they will need to know how to deal with it” financial decisions a young adult makes. This choice will shape their future probably more than anything else. When involving the kids, I try to ensure that they become as engaged as possible. In my experience, making this generation feel comfortable is of the utmost importance. Having candid discussions about spending, career, housing, etc. is essential when dealing with young adults. For example, I’ve found that there’s little to no education among this group of adults on how and where to look for a mortgage. Very rarely do they even have a basic understanding of how a mortgage works or how a borrower would qualify. Then there’s the matter of evolving domestic arrangements. I’ve always taken a very candid approach, asking direct questions
family wealth transfers is ensuring that assets are held at the same institution.) Whenever I deal with a family, it’s essential they are all on the same page when entrusting one individual to manage their finances. Stressing the importance of being the ‘first call’ amid life-changing events is imperative. This information has been prepared by Jamie Suprun, who is a senior investment advisor and executive director, private client group, for HollisWealth. Opinions expressed in this article are those of the investment advisor only and do not necessarily reflect those of HollisWealth. HollisWealth is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.
Jamie Suprun is a senior investment advisor and executive director of the private client group at HollisWealth. He was named by WPC as a Top 50 Advisor earlier this year and was also a finalist for Best Advisor (Alternative Investments) at the 2018 Wealth Professional Awards.
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21/09/2018 8:05:58 AM
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06-07_Opinion-SUBBED.indd 7
21/09/2018 8:06:06 AM
UPFRONT
STATISTICS
Going legal
CANNABIS UPS AND DOWNS A look at the Canadian Cannabis LP Index – which represents the publicly traded market for the medical and recreational marijuana sector in Canada – shows a sharp rise at the end of 2017 when debate over the bill in Parliament was at an apex, followed by a levelling out as the legislation stalled.
As legalization of recreational marijuana looms, numerous factors will play into the overall prospects for investing in the industry ON OCTOBER 17, Canada will become the first G7 country to legalize recreational marijuana nationwide. The official legalization date was announced by Prime Minister Trudeau on June 20, giving provinces and the cannabis industry 17 weeks to prepare. In August, Ontario made headlines when it announced that cannabis would be sold through private retailers rather than government agencies. Marijuana-related news has had quite an impact on stocks in the sector over the past
2001
Year medical marijuana was first legalized in Canada
$5.7 billion Amount Canadians spent on marijuana in 2017
several months. Cannabis stocks rose significantly near the end of 2017 in anticipation of legalization, but have dipped in recent months. Going forward, issues like supply and demand, along with partnerships that could lead to additional products, will also have an effect on the market. Even after October 17 has come and gone, there are sure to be just as many cannabis-related developments that will impact those who have chosen to invest in this burgeoning industry.
90%
2019
Percentage of that total that was Target opening date for brick-and-mortar spent on illegal, non-medical sales cannabis retail stores in Ontario Source: Canaccord Genuity, December 2016; Health Canada; Bloomberg BNN; CBC News
INDUSTRY TITANS
POISED FOR GROWTH
Canopy Growth was the first publicly traded cannabis company in North American and has only seen its value grow – especially in light of the recent announcement of a planned $5 billion investment by alcohol giant Constellation Brands.
Deloitte estimates that the current size of Canada’s cannabis market is anywhere from $1.34 billion to $2.75 billion – and that number will only increase after October 17. The legal market is projected to swell up to $4.34 billion; when illegal marijuana sales are factored in, Deloitte estimates that cannabis could be a $7.17 billion market by 2019. Estimated current market size Projected legal market size
Name
Price per share
Canopy Growth
$65.95
Aphria
$20.87
Cronos Group
$14.88
Aurora Cannabis
$9.12
Hexo Corp.
$8.36
Green Organic Dutchman Holdings
$7.99
OrganiGram Holdings
$7.68
Emerald Health Therapeutics
$5.70
Supreme Cannabis Company
$2.20 Source Bloomberg BNN, as of September 12, 2018
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$420 million to $870 million
West
$570 million to $1.37 billion $520 million to $1.06 billion
Ontario
$700 million to $1.68 billion $310 million to $640 million
Quebec
$420 million to $1 billion $90 million to $180 million
Atlantic
$120 million to $290 million $0
$300 million
$600 million
$900 million
$1.2 billion
$1.5 billion
$1.8 billion Source: Deloitte Cannabis Report 2018
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21/09/2018 8:09:25 AM
CANADIAN CANNABIS LP INDEX $1,000 $1,000 $900
November 27, 2017
Opening value on the first trading day of the month
$800
Bill C-45 passes the House of Commons
$700
February 15, 2018
$600
Targeted legalization date of July 1 gets pushed back
$500 $400
June 19, 2018
$300
Bill C-45 passes the Senate; Prime Minister Justin Trudeau announces October 17 as the official date for legalization of recreational marijuana across Canada
$200 $100 $0 Sep 2017
Oct 2017
Nov 2017
Dec 2017
Jan 2018
Feb 2018
Mar 2018
Apr 2018
May 2018
Jun 2018
Jul 2018
Aug 2018
Source Bloomberg BNN, as of September 12, 2018
US ANCILLARY STOCKS TO WATCH As legalization nears, Canadian cannabis producers have a dominant presence in the market. But south of the border, the stock performance of ancillary US companies – those that don’t touch the plant but rather contribute to the process of growing or distribution – can provide some insight into other segments of the market. KushCo Holdings (KSHB)
$8.51
Jul. 19: $22.39
$20.00
Initial listing
$1.50 $3.00 $4.07 $0.20
Aug. 15: $29.10
$0.13 $1.17 $0.09
Tilray and other producers experience steady growth
Marimed (MRMD) Cannabis consultants
Sep. 4: $77.01
Innovative Industrial Properties (IIPR) Real estate facilities for growing and producing
Many have compared the market for marijuana to gold and oil based on its volatility – and no company provides a greater example of that than Canadian grower Tilray.
SHARE PRICE OF TILRAY INC.
52-week low
$4.16
Commercial sales and large-scale grow design
Cannabis community social network
52-week high
$1.82
GrowGeneration Corp. (GRWG)
MassRoots (MSRT)
Current share price
$5.23
Packaging and marketing materials
HOW QUICKLY THINGS CAN CHANGE
$44.00 $46.27 $17.32 $0
$10
$20
$30
$40
$50
Sources: Technical420.com; Hightimes.com; Bloomberg, as of September 19
Sep. 19: $214.06 US Drug Enforcement Association approves Tilray to import marijuana for medical research Source: Bloomberg BNN
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21/09/2018 8:09:40 AM
UPFRONT
NEWS ANALYSIS
Global trade tensions rise Whether between the US and China or Canada and the US, tensions and tariffs are having an impact on the global economy. Darren Matte breaks down what investors and advisors need to know
IT’S BEEN a dramatic summer for international trade relations. Disagreements between the world’s two largest economies, the United States and China, boiled over and resulted in tariffs on Chinese goods. The US also continued to press its desire to redesign the current NAFTA deal, leading to tariffs on Canadian aluminum and steel. Closer to home, a tweet by Canadian global affairs minister Chrystia Freeland, calling for the release of a human rights activist from Saudi Arabia, stoked tensions between the two countries. The international implications are numerous, so investors and advisors need to keep a close eye on developments. The most widely covered international trade dispute has been between the US and China. When the US imposed tariffs on foreign steel and aluminum, China was one
10% tariffs on roughly $200 billion of Chinese goods – which will rise to 25% in January. Tyler Mordy, president and CIO of Forstrong Global, sees a silver lining in the trade disputes between the US and China. “Contrary to popular opinion, the uncertainty that trade wars create could elongate this economic cycle by handcuffing central banks, making policymakers more cautious in normalizing monetary policy and more expansive with fiscal policy,” Mordy says, adding that he’s cautiously optimistic that rational heads will prevail and that trade wars will become isolated with the Trump administration. Rob Edel, chief investment officer at Nicola Wealth Management, believes reducing the trade deficit between China and the US is not the real issue. “The issues when it comes to intellectual
“The uncertainty that trade wars create could elongate this economic cycle by handcuffing central banks” Tyler Mordy, Forstrong Global of the first countries targeted. That prompted China to retaliate with tariffs on 128 products. The US responded by imposing another $50 billion in tariffs on imports in June. China once again countered, this time targeting American agriculture. Now, the US has slapped
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property and some of the bad trade practices that China has are things that need to be addressed,” he says. “It’s harder for China to give some of that up because it’s fairly strategic, but I think that should be the real goal.” However, he adds that if the underlying
agenda in the US is to ultimately restrict Chinese economic growth, that could further incite a trade war and is something investors should be wary of. Canada has also been hit by Trump’s tariffs on steel and aluminum and countered by slapping tariffs on US steel and aluminum, in addition to consumer products. This all happened against the backdrop of NAFTA negotiations, which led the US and Mexico to agree to a tentative new trade deal on August 27, leaving Canada out the discussions. “I think there is some visibility on NAFTA,” Edel says. “How the final deal looks is still in the air. I think it was more between the US and Mexico. I don’t think the US has a problem with Canada as far as trade goes.” However, he did add that a new NAFTA deal that includes a sunset clause could be a concern, as it could persuade companies to establish facilities in the US over Canada. And if the US extends its Canadian tariffs into the automotive industry, it could have a drastic impact – in a recent analysis, TD Bank estimated that auto tariffs would put 160,000 manufacturing jobs in Ontario at risk.
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A TIMELINE OF THE US/ CHINA TRADE WAR March 9 Trump imposes tariffs on imported steel and aluminum from all nations, including China and Canada
March 23 China unveils tariffs on $3 billion worth of US imports in response to steel and aluminum tariffs
April 4 China says it will levy 25% tariffs on 106 additional US products
April 17 China announces it will collect anti-dumping tariffs on sorghum imports from the US, a trade worth about $1 billion in 2017
May 20 China and the US reach an agreement for US to hold off on tariffs and China to increase purchase of US goods, which the US later backs away from
Edel is keeping his eye on these developments and believes a full-on trade war would slow overall global economic growth. However, he feels that selling off equities and becoming defensive too early on could be a mistake if the tensions don’t escalate. “I think you have rational actors who will work this out and have a balanced trade picture going forward,” he says. “The bigger issue for us is what happens as you continue through the economic cycle. As you start to
in emerging countries and China,” he says. “This competitive rhetoric has created opportunities in both emerging market equities and bonds. There are opportunities to establish positions in an asset class that has been indiscriminately sold off. “When everyone is thinking the same thing, no one is doing any thinking,” he adds. “Trade wars fit that idea. A different outcome – likely a positive one – is set to materialize. There is plenty of room for upside surprise.”
“I think you have rational actors who will work this out and have a balanced trade picture going forward” Rob Edel, Nicola Wealth Management raise interest rates, watch the yield curve and look at how close you are to the end of the current economic cycle.” As for Mordy, he’s sticking with a strategy of embracing risk for longer. “There has been a lot of emotionally driven selling, particularly
On a smaller scale, the dispute between Canada and Saudi Arabia is a sign of the social media world of today. Freeland’s calling out of human rights issues resulted in the Kingdom suspending diplomatic relations with Canada. From an investment perspective, the Saudi
June 15 The US announces tariffs on $50 billion of imports from China, and Trump threatens more if China retaliates
July 6 Tariffs on $34 billion worth of imports begin on both sides
August 22 Both countries levy tariffs on an additional $16 billion in goods Source: Bloomberg
government put a freeze on new trade deals, forced the sell-off of Canadian businesses, and the Saudi central bank and state pension funds instructed overseas asset managers to get rid of their Canadian equities, bonds and cash holdings. The positive for Canada is that trade between the two countries was already minimal, and Saudi Arabia’s main export to the country – oil – will not be affected. Nevertheless, the issues happening domestically and abroad are ones investors – and their advisors – should be keeping their eyes on to ensure the best plan for their portfolios.
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21/09/2018 10:15:36 AM
PRODUCTS
UPFRONT
INTELLIGENCE CORPORATE ACQUIRER
TARGET
PRODUCTS COMMENTS
BMO Financial Group
KGS-Alpha Capital Markets
KGS is a US-based fixed-income broker-dealer focusing on mortgage- and asset-backed securities for institutional investors
Gallagher
Leystone Insurance & Financial
Ottawa-based Leystone Financial offers employee benefits and retirement consulting services
Scotiabank
Banco Dominicano del Progreso
The acquisition of the Dominican Republic bank reinforces Scotiabank’s effort to increase scale in economically stable markets with strong growth prospects
PARTNER ONE
PARTNER TWO
COMMENTS
CPPIB
Goodman Group
The pair has committed another US$1.75 billion of equity to its Chinese logistics partnership
Greystone Infrastructure Fund
Rice Commercial Group
The partnership aims to construct a 140,000-square-foot hangar at Toronto Pearson International Airport by 2019
TD Bank
CIBC
Along with Air Canada and Visa Canada, the two banks have agreed to acquire the Aeroplan loyalty program from Aimia
RBC GAM introduces fixedincome pools
RBC Global Asset Management has launched three new actively managed fixedincome pools. The new pools include the RBC Conservative Bond Pool, which focuses on shorterterm investment-grade Canadian bonds; the RBC Core Bond Pool, which concentrates on core global investment-grade bonds and higher-yielding assets; and the RBC Core Plus Bond Pool, which has increased exposure to core global bonds, high-yield corporate bonds, emerging market currencies and other debt instruments.
BMO finalizes broker-dealer acquisition
BMO Financial Group has completed its acquisition of New York-based KGSAlpha Capital Markets. BMO’s move to snap up the fixed-income broker-dealer was previously announced in May as a way for the Big Six bank to expand its existing mortgage-backed securities trading business. “The acquisition of KGS is highly complementary to our strategy,” Pat Cronin, CEO of BMO Capital Markets, said at the time. “The size and scope of the MBS bond market represents a tremendous opportunity to continue to diversify our platform and grow revenues with key new initiatives.” Founded in 2010, KGS-Alpha specializes in the structuring, trading and distribution of mortgage- and asset-backed securities. With the completion of the acquisition, the firm has been rebranded as BMO Capital Markets.
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Foresters global fund pivots to new objective
The imaxx Global Equity Growth Fund, managed by Foresters Asset Management, has been renamed as the imaxx Global Fixed Pay Fund. The name change reflects a new unitholder-approved investment objective for the fund, which is to generate long-term capital appreciation and income through a combination of equity and fixed-income investments from around the world. Management fees for the fund’s various units were also reduced by 10 basis points; fixed monthly distributions are expected for class A3, F3, A4 and F4 units starting on October 22.
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PEOPLE
PEOPLE Fiera makes changes to infrastructure fund
Fiera Capital Corp. has announced it is assuming the portfolio management function for its Investment Grade Infrastructure Bond Fund (IFB.UN); affiliate Fiera Capital will act as the portfolio subadvisor to the fund. The fund will continue to actively invest primarily in investment-grade fixed-income securities of issuers that own, operate or develop infrastructure assets in the US. It aims to provide unitholders with monthly cash distributions and preservation of capital, as well as the opportunity for capital appreciation.
Purpose converts floating-rate fund
Purpose Investments has announced the conversion of the Purpose Floating Rate Income Fund from a closed-end fund to an exchange-traded mutual fund. Class A and Class U units of the fund have been renamed ‘ETF units’ and ‘ETF noncurrency-hedged USD units,’ respectively. Purpose has also introduced ETF non-currency-hedged CAD units on the TSX under the symbol FLOT.B. Purpose said the fund conversion will provide investors with lower fees, more efficient trading and daily liquidity.
Canoe strengthens global equity offering
Canoe Financial has renamed its Canoe Global Equity Income Portfolio Class as the Canoe Global All Cap Portfolio Class. Along with the name change, Canoe Financial has selected Kames Capital, a wholly owned subsidiary of Aegon Asset Management, as the fund’s new subadvisor. According to Canoe Financial president and CEO Darcy Hulston, “Canoe Global All Cap Portfolio Class will leverage Kames’ deep bench of 91 investment professionals to search the world for the best investment opportunities, regardless of location or market cap.”
NAME
LEAVING
JOINING
NEW POSITION
Sonal Desai
N/A
Franklin Templeton Investments
Chief investment officer, fixed income group
Lesley Gibson
Choice Properties REIT
CT Real Estate Investment Trust
CFO
Neil Gross
N/A
OSC Investor Advisory Panel
Chair
Michael Kitt
Oxford Properties
RBC Global Asset Management
Head, real estate equity investments
Alvin Sharma
Echelon Financial Holdings
Foresters Financial
Global CFO
Ted Whitehead
Credit Suisse
Arrow Capital Management
Managing director and senior portfolio manager
Franklin Templeton appoints new fixed-income CIO
Franklin Templeton Investments has announced the selection of Sonal Desai as the new chief investment officer for its fixed income group. Desai will take over the role from Chris Molumphy – along with his seat on Franklin Templeton’s executive committee – when he retires on December 31. Desai joined Franklin Templeton in 2009 after stints as an economics professor at the University of Pittsburgh and as an economist for the International Monetary Fund and Thames River Capital. As fixed-income CIO, she will supervise the firm’s corporate credit, emerging markets debt, bank loan, global aggregate, securitized, money market, multi-sector, municipal, and local fixed-income strategies and teams. As of June 30, Franklin Templeton’s fixed income group had a total AUM of US$157 billion.
Foresters names new global chief financial officer
Foresters Financial has announced the appointment of Alvin Sharma as its new global chief financial officer. Sharma brings broad financial experience to the role; he most recently served as CFO at Echelon Insurance. He has also been involved in corporate finance, investments, global treasury and capital management, and regulatory and rating agency management. In addition, Sharma has extensive life insurance and asset management experience in the US, UK and Canada. “Alvin’s deep background in the financial industry makes him a tremendous asset to Foresters,” said Foresters Financial president and CEO Jim Boyle. “I have full confidence he will provide timely and insightful counsel.”
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24/09/2018 7:50:38 AM
UPFRONT
ETF UPDATE NEWS BRIEFS Has Canada’s ETF market reached its peak? As of August, Canada’s ETF space had 621 listed funds, compared to 2,130 in the US; per capita, Canada has more than three times the number of ETFs as the US. In an interview with Bloomberg, Mark Noble, head of sales strategy at Horizons ETFs, argued that this saturation, coupled with a slowdown in asset growth, creates a difficult environment for new entrants. “The opportunity set is really drying up for new ETF providers,” Noble said. “I think for a lot of them, the horse has left the barn in terms of trying to capture growth.” However, other analysts argue that there’s still plenty of room for providers with well-crafted strategies and unique solutions.
Study finds ETF performance limited by current trading practices A recent study from Greenwich Associates has found that many institutional investors deploy the same methods for trading ETFs as they do for equities, often leading to sub-optimal executions. In particular, algorithms and transaction-cost analysis systems designed for single-stock trading are often being applied to ETFs. In addition, equity traders often find themselves outside their comfort zone when working with fixed-income ETFs, which move like the bond market. The report recommended that ETFs be treated as an asset class separate from equities, derivatives or fixed income.
First Asset introduces new government bond ETF First Asset Investment Management has launched the First Asset Enhanced
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Government Bond ETF on the TSX. The ETF will be co-managed by Marret Asset Management and is available in both Canadian dollars (FGO) and US dollars (FGO.U). The actively managed fund aims to provide long-term total returns from income and capital appreciation derived primarily from government debt; it has a management fee of 0.60%.
Vanguard unveils new international high-dividend ETF Vanguard Investments Canada has launched the Vanguard FTSE Developed ex North America High Dividend Yield Index ETF (VIDY) on the TSX. With a management fee of 0.28%, the fund tracks an index that measures the investment return of stock issuers characterized by high-dividend yield, with a focus on developed-market companies outside of North America. VIDY makes quarterly distributions and is rebalanced annually to offer exposure to large- and mid-cap companies with above-average dividend yields.
New blockchain ETF debuts on the NEO Exchange First Block Capital has announced the launch of the FBC Digital Ledger Technology Adopters ETF on the Aequitas NEO Exchange. Sub-managed by Bruce Campbell of StoneCastle Investment Management, the fund is roughly 75% weighted toward bluechip stocks, while the remainder is invested in higher-risk developers and cryptocurrency miners. “You’re looking at companies that are going concerns,” said First Block Capital COO Bill Stormont. “They don’t necessarily live or die by their blockchain investments, but as they integrate them, [we hope that they] perform.”
Making the most of ETFs Even investors that don’t require intraday liquidity can benefit from this unique feature of ETFs
While investors are able to buy and sell ETFs throughout a given day of trading, not all choose to exercise that benefit. Many purchase ETFs with the intention of holding the products in their portfolios for the long term. But even for such buyers, there’s an advantage in the fact that ETFs trade on an exchange unlike other wrappers such as mutual funds. “Because the ETF is exchange-listed, it provides an extra avenue of liquidity in addition to the liquidity provided by the underlying securities,” wrote Anita Rausch, head of capital markets at WisdomTree, in a recent commentary. “This proves extremely useful during times of stress.” As an example, Rausch cites the seizure in the high-yield bond market during the fall of 2015. Third Avenue Focused Credit, a mutual fund that was invested in extremely distressed debt, had to halt redemptions during the event. Many high-yield bond ETFs, on the other hand, were still able to trade without error. “Although spreads may have widened to reflect the underlying stress, these ETFs went on to trade many multiples of their average daily volumes for many months,” Rausch wrote. Tax efficiency is another benefit. ETFs are generally more tax-efficient than their counterpart mutual funds because they are able to redeem and create shares through an in-kind mechanism. The ability to trade
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Q&A
on exchange also provides tax benefits, as it allows shares of the ETF to be passed back and forth without generating turnover in the underlying portfolio. “In fact, an Investment Company Institute report notes that less than 10% of the ETF
“[An ETF] provides an extra avenue of liquidity … This proves extremely useful during times of stress” average daily volume [ADV] translates into creation/redemptions or trading within the fund,” Rausch noted. This, in turn, creates an opportunity for investors to trade an ETF for less than the cost they’d pay to buy or sell the underlying components. Since market makers don’t have to execute trades for 90% of the ADV, they can pass on savings to the end investor in the form of tighter spreads. Prior research from KCG observed that 90% of US equity ETFs with underlying US equity securities trade tighter than the cost to buy or sell that collection of securities. “The exchange listing of an ETF provides a place away from the portfolio to trade exposure of that investment strategy,” Rausch wrote. “This extra place to trade adds another dimension to that investment strategy.”
Jeff Weniger
Opportunity in the East
Asset allocation strategist WISDOMTREE
Years in the industry 12 Fast fact The WisdomTree ICBCCS S&P China 500 Index ETF offers exposure to the largest 500 eligible companies from the S&P Total China BMI Index
What are some of the major factors impacting the Chinese economy right now? Most people expect the answer to be trade wars, but we take a bit of a contrarian view that it’s more rhetoric than reality. Data on China has revealed double-digit growth in both imports and exports yearover-year for this summer. But the key overarching vision for the Chinese government is a movement toward more of a consumptionbased economy driven by the Chinese themselves. There’s been talk of a slowdown due to housing prices, but we’re also looking at the relatively robust retail sales data and seeing that there isn’t much of a problem.
What does China’s accelerating liberalization mean for Canadian investors? A Canadian investor can take several different perspectives. Despite being a G7 economy, Canada is small in the grand scheme of things. The Chinese economy, meanwhile, has an aggregate size of US$14 trillion, or US$25 trillion based on purchasing power parity. Depending on how you measure it, it’s either tied for number one with the US, or it’s the largest economy in the world. Canadian investors have heavy domestic exposure, even though the Canadian market comprises only 3% of the global total, and their ‘foreign’ exposure comes largely from US large-cap firms. We’ve found that emerging markets make up around 12% of the total global market capital, but many Canadians have 0% of that. Our thesis is that China will make up half of a bipolar global economy, with the US as the other half. If that’s the case, then the current Chinese weight of 3.5% in global stocks will have to ratchet up, and more non-Chinese investors — including Canadians — need to rush in.
How can those seeking exposure to China benefit from investing in WisdomTree’s new index-based ETF? One thing investors have to look out for is concentration risk. A lot of ETFs out there are actually tracking only 50 names. There’s nothing necessarily wrong with that, but with Chinese companies, you can get into a situation where you’ve got 40% in the financial sector. Many China-listed companies are champions of the state and not necessarily driven by profit, which means they come with potential conflicts of interest for investors. Having stakes in Chinese companies listed in other exchanges like New York gives you names that didn’t even exist a decade ago, like TenCent, Baidu and Alibaba, but being too concentrated in those stocks comes with its own dangers. Our S&P China ETF 500 Index ETF takes care of all that. We wanted to make sure investors can get a little piece of every sector and every exchange. There’s no need to buy and monitor multiple China ETFs; they can just get broad exposure from a recognizable index provider and make that their core emerging market holding.
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UPFRONT
ALTERNATIVE INVESTMENT UPDATE
Canadian VC nearing a five-year streak Money continued to flow into Ontario and the tech sector in the first half of the year
28% improvement over the previous quarter. The top 10 disclosed deals in the first half of the year accounted for $624 million, or 38% of the total. Through June, the industry saw seven mega deals (those exceeding $50 million each), which were led by a $90 million financing round for Torontobased food-ordering app Ritual. Among the provinces, Ontario was the runaway leader in deals and dollars, raising $907 million over 116 deals in the first half of the year. Quebec was second with 94 deals
“Canada is enjoying the best venture capital investment climate in well over a decade”
The second quarter of 2018 brought 166 deals and nearly $1 billion in investment into Canada’s venture capital space, according to the Canadian Venture Capital Association [CVCA]. That pushed VC investment for the first half of the year to $1.7 billion, which was 7% higher than 2017’s half-year total. “Innovation in Canada is enjoying the best venture capital investment climate in well over a decade,” said CVCA CEO Mike
NEWS BRIEFS
Woollatt. “We’re consistently observing an increase in size and volume of deals at all stages, plus a welcome resurgence in exits. We’re bracing for 2018 to be another record year.” In its VC & PE Canadian Market Overview for the first half of 2018, the CVCA noted that Canadian VC has been on an upward trajectory since 2014. Average deal size in the second quarter of this year was $6 million, a
Coinsquare eyes European expansion
Coinsquare, the premier Canadian trading platform for Bitcoin, Ethereum and other cryptocurrencies, has announced plans to expand into the European market. The firm’s first international push under the Coinsquare brand, which will provide customers across Europe with access to its entire suite of coins, is set for the fourth quarter of this year. “Entering a massive market like the EU is an exciting step closer to Coinsquare’s vision of becoming a global 21st-century financial institution,” said CEO Cole Diamond.
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worth $319 million, followed by BC (42 deals/$276 million). In terms of the most popular sectors, information and communications technology retained its top status with just over $1 billion amassed in 189 deals – nearly two-thirds of all VC dollars invested in the period. Life science companies and cleantech were a distant second and third. The first half of the year also saw a marked increase toward later-stage companies, which received 41% of investments, or $901 million. Early-stage companies, on the other hand, got just 37% of the pie. And, the CVCA reported, “the market for exits continued the rebound from last year with 16 exits.”
EdgeHill Partners launches liquid-alt mutual funds
EdgeHill Partners has launched the first family of prospectusoffered ‘liquid alt’ alternative mutual funds in Canada under the EHP Funds brand. The six new long/short funds offer alternatives to traditional long-only mutual funds and provide exposure to different geographies, asset classes and investment objectives. “Our funds are designed to limit volatility and downside versus traditional funds,” said EHP Funds’ Jason Mann. “These funds can help diversify portfolios and improve investment outcomes, regardless of market direction.”
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Q&A
Jonathan Shapiro Senior director for business development
Liquid alternatives pose a tech challenge
LINEDATA GRAVITAS
Years in the industry 18 Fast fact Linedata Gravitas is a global tech solutions provider that caters to investment managers and hedge funds
With the proposed National Instrument 81-102 on liquid alternatives coming into force, what challenges do you foresee for managers? Fundamentally, as fund managers are trading and looking at positions from a front-office perspective, and analysts are valuing companies, there’s obviously going to be a change in the way that they are to trade in positions from a T+1 basis in hedge funds to a more liquid and transparent type of strategy. They also have to be more efficient about how they use their infrastructure. From the change in requirements that we saw when this happened in the US, the type of infrastructure that they need to run is going to be much more robust. It’s a challenge that managers will have to adapt to as time goes on, and they’ll have to be judicious in deciding who will help them beef up their platforms and processes.
From a technology perspective, what do asset managers need to have in place for a successful transition? I think they’re going to need to put in place different types of systems to make the process run smoothly. The first thing is a more robust order-management system with capabilities for a good intraday trading view as opposed to T+1. They need to be more agile and fluid in looking at their positions in the marketplace and putting all of those positions together. With the increased transparency in positions in the
Ninepoint Partners eyes another flowthrough LP
Ninepoint Partners has announced a preliminary prospectus for the Ninepoint 2-18-II flow-through limited partnership. Units will be offered at $25 per unit, with a minimum subscription of 100 units, and Sprott Asset Management will serve as the subadvisor for the LP. The partnership is aiming for capital appreciation and significant tax benefits via a diversified portfolio of flow-through shares and intends to provide liquidity to limited partners through a rollover to the Ninepoint Resource Class prior to February 28, 2020.
new environment, they also have to revisit how they reconcile positions with the various counterparties they’re working with. Right now, managers have a chance to either upgrade their software internally or look for a provider with a solution balanced for a liquid-alts environment, as well as the way they operate as a traditional assetmanagement firm. It could lead to disruption, but also some growth and expansion in the vendor space they’re using currently.
Mackenzie Investments was the first to obtain an exemption to launch a mutual fund with alternative strategies. How significant is this first-mover advantage? I think it’s extremely significant and well-timed. I believe in the five years following the financial crisis in the US, the liquid-alts market grew from around US$83 billion to some US$200 billion. I think Mackenzie is set to get the first crack at investment dollars that’ll come in from non-traditional, noninstitutional investors; they’ll see growth pretty quickly, which will spur on other firms to do the same. I’m already seeing some firms starting to get involved in the Canadian market, and having that early adopter position creates great positive news for them, but it will also drive business into that strategy for other entrants over the next one to two years of the regulations taking full effect.
HNW investors to lead Canadian impact investing
A study by MaRS and SVX has found that 90% of high-net-worth investors in Canada are interested in impact investing. Women were slightly more inclined than men to explore impact-investing options, and younger respondents (aged 25 to 39) were also keener than other age groups. Retail investors and high-net-worth investors with more than $10 million in assets showed the biggest inclination toward impact investing. In terms of asset classes and product type, respondents were most interested in public equity, green bonds and private equity.
Private debt reaches new AUM record
According to a recent industry analysis by Preqin, private debt hit a new milestone in 2017: By the end of the year, assets under management had jumped 13% to US$667 billion, and dry powder held by funds increased by 18% to US$246 billion. Preqin reports that since 2007, investments in private debt have tripled from their original level of US$204 billion. However, only 51% of investors surveyed at the end of 2017 saw the industry positively, compared to 60% in 2016.
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PEOPLE
INDUSTRY ICON
A DISCIPLINED APPROACH AGF’s Blake Goldring draws on his experience with the Canadian Forces to help shape his leadership style STEP INTO AGF chairman and CEO Blake Goldring’s office, and it’s immediately clear how proud he is of his involvement with the Canadian Forces. Goldring’s tremendous success as a leader in the financial industry is due in part to the lessons he’s learned from the Canadian Forces. Another major driving force behind his leadership style is his father, Warren, who co-founded AGF back in 1957. While Goldring has had many mentors in his 35 years in the industry, his father was the first. “He taught me early to respect and treat people well and always take the high road,” Goldring says. “That advice has served me well.” Since he first joined AGF in 1987, Goldring has seen a great deal of change both in the company and the financial industry as a whole, including enhancements in technology, evolving regulations and changing client demands. “Growing up in the business with my dad gave me a great perspective,” he says. “It shaped my vision of how I wanted to build AGF going forward.”
People first Although AGF began primarily as a mutual fund provider, in recent years it has grown to offer different products to meet clients’ needs. “We have purposefully diversified our business with thoughtful entries into new markets and enhancements to our existing business,”
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Goldring says. “Today, we are a global asset management firm with four key platforms: fundamental – which includes retail and institutional – alternatives, quantitative and high-net-worth.” Goldring attributes his success to the relationships he has built over the years and to AGF’s strategic acquisitions, both of which
and communication, articulates so well what we are doing as a firm. We are a brand that advisors know well – they know what we stand for and know that we do what we say we are going to.” AGF’s strategy revolves around three key principles: first, shared intelligence and collaboration from more than 65 investment profes-
“I realized there were many links between business and the military. Everyone in the military is taught to be a leader ... my takeaway was to grow as a leader myself through discipline, focus and accountability” have helped the firm move into new investment management spaces, including quantitative and factor-based investing and ETFs, while also establishing a private client business. Goldring is also committed to innovation, which has meant surrounding himself with strong team players to carry out AGF’s vision of integrity and trust. “It all starts with people,” he says. “We have lots of key leaders here. Kevin McCreadie, AGF’s president and CIO, is critical to lead our change with the investment management team. Karrie Van Belle, SVP of marketing
sionals around the world; second, a measured approach that analyzes real-time data; and third, active accountability that makes sure the company delivers on its promises. Goldring’s approach might seem regimented, but it comes as little surprise in light of his involvement with the Canadian Forces. In 2006, he formed Canada Company, a foundation that celebrates Canadian military heroes and their families and fosters an exchange between Canada’s militarytested resources and the Canadian business community. His efforts led to him being
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PROFILE Name: Blake Goldring Title: Chairman and CEO Company: AGF Management Based in: Toronto Years in the industry: 35 Fast fact: Goldring started his career working on AGF’s Japanese and Asian portfolios and also helped set up AGF International Advisors Company Limited in Dublin
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PEOPLE
INDUSTRY ICON
named the first Honorary Colonel of the Canadian Army in 2011. “My involvement with the Canadian Forces really showed me the emphasis on leadership,” Goldring says. “I realized there were many links between business and the military. Everyone in the military is taught to be a leader – it’s a different culture, but my takeaway was to grow as a leader myself through discipline, focus and accountability.”
Changing with the times That involvement helped Goldring through one of the greatest challenges of his career – the market crash in 2008. “I had organized a retreat for some of my colleagues with the soldiers,” he remembers. “It was a stressful
Another major change for AGF has been its foray into the ETF industry, underpinned by Goldring’s belief that both ETFs and mutual funds have a place in investors’ portfolios. And in 2017, AGF continued to build on its history of innovation with the launch of AGFiQ, a quantitative investment platform that delivers custom solutions in a variety of vehicles, from mutual funds to ETFs to model portfolios, all designed to provide better risk-adjusted returns via a disciplined, multi-factor process that looks at risk through multiple lenses. “To ensure we made a differentiated entrance into the ETF space, we leveraged the complementary strengths of the investment professionals across AGF, Highstreet and FFCM and their quantitative, factor-based
“This is a great business for individuals who like change and innovation. It is a competitive business, but there’s an opportunity in the advisor role as demographics surge and current advisors retire” period, but working with the soldiers, people just put their phones away and disconnected to what was going on with the markets. It put things in perspective – we are blessed to be in our industry, while others are willing to pay the ultimate sacrifice so we can do what we are passionate about.” While the financial crisis was a difficult time for everyone in the industry, Goldring looked at it as an introspective period. He began to look at other markets, made difficult decisions and relocated capital to establish a joint venture with Instar Group to form InstarAGF, an independent alternative asset management firm with emphasis on real assets, including infrastructure investments, in the North American middle market. In January 2015, InstarAGF was part of a consortium of local and international infrastructure investors that acquired the passenger terminal at Billy Bishop Toronto City Airport.
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investment process,” Goldring says. “We have nine ETFs in Canada, and we are growing. We see it being very big business for us. It takes time, but I am very proud of my colleagues who helped put this together. I am very excited for the future.” It’s that optimism that Goldring strives to impart on others who are just entering the business. “This is a great business for individuals who like change and innovation,” he says. “It is a competitive business, but there’s an opportunity in the advisor role as demographics surge and current advisors retire. I think what is most important about this business is that we provide financial health to our clients and ultimately their clients. There are people who focus on the spirit, the social and physical health of individuals, but to me, dealing with financial health has always been a great calling. I am passionate about it, and that’s not going to change.”
AGF BY THE NUMBERS
1957
Year AGF Management was founded by C. Warren Goldring and Allan Manford
1968
Year AGF made its debut on the Toronto Stock Exchange
44%
Percentage of AGF board members who are women
33%
Percentage of executive employees who are women
$39 billion
AGF’s total assets under management as of July 2018
1 million+
Number of investors AGF serves
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© S&P Dow Jones Indices LLC, a division of S&P Global 2018. All rights reserved. S&P ® and Indexology ® are registered trademarks of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund.
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SPECIAL PROMOTIONAL FEATURE
EXPERT ADVICE
Investing for a better tomorrow Wealth Professional Canada caught up with Horizons ETFs’ Tammy Cash to learn how socially responsible investing can make a difference
IF YOU ASK most investors why they invest, you’ll likely hear about ROI, saving for a home or retirement on the horizon. Some might even say they do it for the thrill of beating the benchmark and or coming out ahead of others who are participating in the market. But there’s a growing contingent of investors who are interested in putting their money to work in a manner that reflects their values. Socially responsible investing, or SRI, is the practice of investing in companies that embrace, reflect and promote positive societal impact while seeking a positive financial return. In practice, socially responsible investors generally consider a company’s environmental, social and governance [ESG] efforts as part of the evaluation process. According to Tammy Cash, Horizons ETFs’ executive vice-president of marketing, SRI funds can also be potent vehicles for financial and social ROI. “Companies that pursue ESG principles tend to be more mature companies,” she says. “They recognize the value of ethical practices for not only their brand but their bottom line as well. Some people tend to think that when companies invest in their communities and pursue higher standards, it’s just an added line on the expense sheet. But that’s not true – socially responsible companies are more likely to avoid regulatory and cost-intensive risks like labour disputes, environmental
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fines or brand boycotts. It pays to be a good corporate citizen.” Cash is a board member for Women in ETFs, an organization that works to promote gender equality and female leadership in the male-skewed world of financial services. She was also part of a team that raised millions from Bay Street titans for charitable endeavours across Canada. She highlights how SRI can provide a personal impact to investors in addition to generating returns. “This isn’t just marketing – this is real for investors,” she says. “Doing good feels good – that’s why socially responsible investing can be such an emotional experience. You can take pride in the fact that your investment is helping to achieve something you believe in, whether it’s a low-carbon future, alleviating poverty or championing progressive values globally.” In Canada, more than $1.5 trillion in AUM goes to SRI, and most of that is driven by institutional trading. Many of Canada’s large pension funds have mandates to invest with ESG principles as part of their portfolio strategies. The Canada Pension Plan Investment Board, for example, has grown its sustainable investing fund to $316 billion (as of March 2017), investing in companies that focus on climate change, water quality and management, human rights, and executive compensation.
However, individual investors are increasingly looking to put their money into ethical investing, too. According to the Responsible Investment Association [RIA], individual investor assets in SRI almost doubled from 2013 to 2015. That’s likely due in part to millennials. A recent survey from Ipsos Reid revealed that this generation is significantly more likely than others to show an interest in responsible investing. Another significant SRI demographic is women, whom the RIA found “are less likely than men to express uncertainty about responsible investing.” The growing popularity of robo-advisors has also helped spur a greater focus on SRI by giving investors access to more ready-made portfolios and options that reflect their values. Another understated aspect of SRI is progressively minded investing – focusing on developments that can bring about a brighter future, such as alternative energy sources that reduce fossil fuel dependence or AI technology that can make labour safer. Horizons ETFs is already at the forefront of investing in disruptive technologies through its Robotics and Automation Index ETF (RBOT) and will soon launch its own SRI ETF: the Horizons Global Sustainability Leaders ETF (ETHI). According to the preliminary prospectus, ETHI will provide investors with a global ETF portfolio made up of mature, large-market-cap
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THE MOST IMPORTANT ISSUES FOR INVESTORS A 2016 survey by the Responsible Investment Association looked at which ESG issues were most important to investors in different generations. Social
Environmental
Governance
Millenials
31% 31% 13%
companies from across the world that have achieved a strong rating as ethical and responsible corporations. “We’re excited about ETHI’s potential in the Canadian marketplace,” Cash says. “By and large, Canada enjoys a reputation across the world as a nation that contributes to the global good. With our ETF, Canadians can continue that international goodwill by investing in a diverse set of ethical, global companies. We all want to make this world a better place for today and for future generations. With ETHI, we have a chance to energize companies that are helping do just that.” Horizons ETFs also plans to introduce more SRI ETFs in the future that will provide investors with portfolios aligned to meet specific social criteria. “Part of our mantra has always been to empower investors, whether that’s by providing access to information, education or ETFs that meet their specific
investing goals,” Cash says. “It is part of our DNA. Providing increased options for investing aligned with an individual’s core beliefs are an extension of that goal of empowerment – we are helping investors to stay true to themselves.” And it’s obvious that SRI is here to stay in Canada. “In an increasingly socially connected world where we’re instantaneously aware of a corporation’s misdeeds or participating in a new challenge designed to raise money for a worthy cause, responsible investing is now one of the fundamental ways to put your money where your mouth is,” Cash says. As Canadians demand more from the private sector, it’s only natural that corporations will go that extra mile, she adds. “Horizons ETFs is hoping to help ignite that momentum with Canadians and help them so that they can invest while making this world a better place.”
Generation x
Tammy Cash, Horizons ETFs
31% 27% 12%
26% Baby boomers
“You can take pride in the fact that your investment is helping to achieve something you believe in”
0
31% 11% 10%
20%
30%
40%
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21/09/2018 10:37:13 AM
Dividend Factor ETFs and Mutual Funds • Fidelity Canadian High Dividend Index ETF • Fidelity U.S. Dividend for Rising Rates Index ETF • Fidelity U.S. Dividend for Rising Rates Currency
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Commissions, trailing commissions, management fees, brokerage fees and expenses may be associated with investments in mutual funds and ETFs. Please read the mutual fund or ETF’s prospectus, which contains detailed investment information, before investing.
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INNOVATIVE INTELLIGENT INCOME
fidelity.ca/ETFs Ask your Fidelity representative.
Mutual funds and ETFs are not guaranteed. Their values change frequently. Past performance may not be repeated. Fidelity Investments is a registered trademark of Fidelity Investments Canada ULC.
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71045-v2018911
2018-09-14 3:58 PM 21/09/2018 8:22:18 AM
SPECIAL REPORT
ETF INNOVATION
INNOVATION AND EVOLUTION IN ETFs ETFs continue to gain popularity with investors. Wealth Professional Canada talked to some of the country’s biggest ETF trend leaders to get their view on the current state of the ETF landscape EXCHANGE-TRADED FUNDS have a long history in Canada, but the investment vehicle has gained considerable traction in the last few years. More and more providers are popping up; as of July 31, there were 621 ETFs in Canada, amounting to almost $164 billion in assets, according to the Canadian ETF Association. The surge in popularity was most
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noticeable between 2015 and 2017, when ETF assets rose from $89.5 billion to $147.1 billion. With more ETF providers crowding the market, the need for innovation has never been higher. Today’s ETFs encompass everything from fixed income to equities, active to passive solutions, and even factor-based and thematic options. The abundance of
choice in the market, combined with new trends such as the race to 0% management fees, can make finding the right ETFs for an investor quite a challenge. With that in mind, Wealth Professional Canada spoke to some of the leading ETF providers to find out which corners of the ETF market advisors should be paying attention to.
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21/09/2018 9:57:27 AM
Brought to you by
THE EBB AND FLOW OF ETF ASSETS Over the past 20 months, net inflows into Canadian ETFs have crossed the $2 billion threshold 12 times, and the market has only experienced a net loss in flows twice.
Net flows, Canadian ETF market $4 billion $3.5 billion $3 billion
Net flow
$2.5 billion $2 billion $1.5 billion $1 billion
$500 million $0 -$500 million -$1 billion Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
2017
Feb
Mar
Apr
May
Jun
Jul
Aug
2018 Source: National Bank Financial, as of August 2018
WHERE ARE ETF ASSETS CONCENTRATED?
TOP 10 ETFs IN CANADA
XIU iShares S&P/TSX 60 Index ETF ZSP BMO S&P 500 Index ETF
ETF market share by asset category
Core S&P 500 Index ETF XSP iShares (CAD-Hedged)
XIC
iShares S&P/TSX Capped Composite Index ETF
S&P/TSX Capped Composite ZCN BMO Index ETF
70.3%
0.7%
27.2%
0.1%
Equity
Fixed income
1.6%
Multi-asset classes
Commodities
Currency
ABOUT THE SPONSOR
ZAG BMO Aggregate Bond Index ETF XBB iShares Canadian Universe Bond Index ETF ZEA BMO MSCI EAFE Index ETF ZPR BMO Laddered Preferred Share Index ETF XEF iShares Core MSCI EAFE IMI Index ETF
BMO Global Asset Management is a global investment manager with offices in more than 20 cities in 14 countries, delivering service excellence to clients across five continents. Our clients have access to the investment expertise and insights of our investment professionals located in Toronto, Chicago, London and Hong Kong, as well as our network of world-class boutique managers strategically located across the globe. We leverage the skills of this global platform to continually innovate our comprehensive suite of exchangetraded funds, actively managed mutual funds, managed solutions and segregated funds. At BMO Global Asset Management, our aim is to help our clients overcome the challenges they face and deliver the long-term investment outcomes they seek. By understanding our clients’ objectives and pain points, our portfolio managers constantly strive to deliver an effective balance between adding value and reducing risk.
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21/09/2018 9:57:46 AM
SPECIAL REPORT
ETF INNOVATION
Raymond Chan Director, portfolio manager
Charles-Lucien Myssié Director, portfolio manager
Chris McHaney
Rob Bechard
Director, portfolio manager
Managing director, head of ETF portfolio management
Inside the BMO ETFs team WPC recently visited the BMO Global Asset Management headquarters in downtown Toronto to meet some of the ETF team’s key members WHEN BMO Global Asset Management launched its ETFs business in 2009, it was literally starting from nothing – zero assets under management. Although the firm was backed by the name of a renowned Canadian banking institution, in reality, it faced the same obstacles as any startup fund provider. Nine years later, the growth of BMO ETFs has been nothing short of astronomical. From surpassing $7 billion in AUM in three years to launching some of the most innovative ETFs in the world, it’s been a high-octane journey of smashing targets and continuous improvement. Here, WPC talks to some of the BMO ETFs team’s main players to get the inside scoop on their success so far.
CANADA’S KEY ETF PLAYERS The top two providers – BMO and BlackRock – account for almost 70% of total market share.
31.0%
BMO $50.7 billion
RBC $5.1 billion
36.9%
2.8%
10.7%
2.5%
6.5%
1.6%
iShares $60.4 billion
Canadian ETF market share
3.1%
Vanguard $17.6 billion Horizons $10.6 billion
First Asset $4.6 billion Invesco $4.1 billion Purpose $2.6 billion
5.0%
Other providers $8.1 billion Source: Bloomberg, as of August 31 , 2018
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Brought to you by
Chris Heakes
Alfred Lee
Vishal Bhatia
Matt Montemurro
Director, portfolio manager
Director, investment strategist and portfolio manager
Director, portfolio manager
Director, portfolio manager
BMO ETFs BY THE NUMBERS
A GROWING INFLUENCE BMO GAM has achieved massive growth in AUM since first launching ETFs in 2009.
Canadian ETF market AUM Total
Top 10
BMO ETFs
global fixed-income ETF provider based on AUM
$160bn
Over 35% of Canadian ETF AUM growth in 2017
$140bn $120bn
Top 20
$100bn $80bn
global ETF provider (listings in Canada, Europe and Hong Kong)
$60bn
#1
most precise fixed-income suite in Canada
$40bn $20bn
#1
$0 2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Source: Bloomberg, as of April 2018
in Canadian net new assets seven years in a row
Top 12
global smart beta ETF provider based on AUM
Sources: Bloomberg, as of April 2018; ETFGI Industry Report; ETFGI ETF and ETP Smart Beta Insights: Global, April 2018
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21/09/2018 9:58:16 AM
SPECIAL REPORT
ETF INNOVATION
“In the early days, we were taking risks to fill gaps in client portfolios that other providers were ignoring. As a result, we have grown a lot quicker than people expected”
30
KEVIN GOPAUL
ROB BECHARD
Head, BMO Global Asset Management Canada
Managing director, head of ETF portfolio management
When BMO Financial Group launched its ETF business in 2009, it was a completely new direction for the bank: a new team, new focus and, importantly, a new product line as BMO Global Asset Management became the first bank affiliate in Canada to offer its own lineup of ETFs. Rob Bechard and Kevin Gopaul have been with BMO ETFs since the very beginning. Both men have been instrumental in pushing the business forward and ensuring it continues to hit key milestones. From reaching $1 billion in assets under management only 15 months after entering the ETF market to being the top asset gatherer for seven years in a row, it’s been an exhilarating ride. However, for Gopaul and Bechard, this is just beginning. “We started this business at zero, in a very humble position, and every dollar we brought in and every client we met was so important,” Bechard says. “That was an
important starting position for us, and we have managed to keep that philosophy. All of our teams hit the ground running from day one and have maintained that momentum ever since.” Innovation has been at the heart of BMO ETFs’ growth story. In the early days, the ETF team had the feel and flexibility of a startup, and Bechard and Gopaul were eager to encourage (and drive) an innovative and creative approach – one that remains at the core of BMO ETFs’ strategy for delivering cutting-edge solutions to Canadian investors. “We are creative individuals by nature, and we were both institutional portfolio managers previously, so we know how to bring quality and rigour to new solutions,” Gopaul says. “Launching top-quality ETFs has created a level of confidence that has been the catalyst for more ideas to come forward, like the covered call strategy.”
Although BMO ETFs no longer flies under the radar like it did in its early days, the company is still committed to doing things differently, to making unique ideas a reality for investors. Some of the first fixed-income ETFs, synthetic ETFs and currency-hedged ETFs were managed by members of the team. “In the early days, we were taking risks to fill gaps in client portfolios that other providers were ignoring,” Bechard says. “As a result, we have grown a lot quicker than people expected. Those successes gave us the energy and confidence to really push the business aggressively forward.” Bechard and Gopaul are clearly proud of the team spirit they have created. The pair has now worked together for 15 years, and in addition to each understanding how the other operates, they recognize the importance of having a strong and happy group. “We have voluntary turnover rate of zero, and that has helped us build an investment management team that is one of the most experienced in Canada, if not the world,” Gopaul says. “We have fostered a very collaborative and trusting culture, which makes me very proud.”
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Brought to you by
ALFRED LEE Director, investment strategist and portfolio manager
MATT MONTEMURRO Director, portfolio manager
Alfred Lee was developing ETF-related strategies for a large Canada-based brokerage when he received a job offer from BMO ETFs in 2010. It didn’t take Lee very long to decide to join the BMO ETFs team – and he definitely has no regrets. “This is by far the most enjoyable job I have had in my career,” Lee says. “A lot of the team’s core members have been here since the beginning, and there is a real entrepreneurial spirit in the group. We have built the business from zero, and we retain a lot of the characteristics and qualities that enabled us to do that.” In addition to being an investment strategist, Lee also manages fixed-income and preferred-share mandates for both institutional and retail clients. “It is a very innovative team; we collaborate with our product team in coming up with new ideas and then help see those through to fruition,” he says. “Then, when it is trading on the exchange, we continually service the product and manage and support it
from an investment perspective.” As part of the global fixed-income ETF management team, Lee is involved in the management and trading of a wide variety of portfolios. “Compared to a traditional portfolio manager, our skill set tends to be broader,” he says. “Rather than focusing on one asset class, we are required to be experts from everything from Canadian to US bonds, emerging market bonds, preferred shares, credit derivatives and everything in between. “We are all very hands-on with every part of the business,” Lee adds. “Although on paper, I am a portfolio manager, I am also involved with investment strategy, sales positioning, index and product design, and education for our clients and sales staff. It is a very dynamic culture we have on our team – there’s a lot of interaction with different market participants, but our main objective is that we want to make a difference for the end investor.”
Matt Montemurro has been with BMO for his entire career, joining the company after graduating with an honours business administration degree from the Richard Ivey School of Business in 2009. He started on the wealth management associate rotation program, bouncing between business units and learning the different roles within wealth management. After the program, Montemurro joined BMO GAM as a trader on the active fixed-income team. He thrived in the unique and very human world of fixed-income investing. “It is more of a relationship business compared to equity markets,” Montemurro says. “I found that my personality and skill set fit that well. Bonds are not exchange-traded, so there is still that negotiation aspect, and to succeed you need to be able to make meaningful human connections.” It was around the same time that the ETF team was beginning to flourish. Montemurro was hearing positive things and had gotten to know Rob Bechard, Kevin Gopaul and the team, so when an opportunity arose to come onboard, he was excited at the prospect.
“There is a really unique desire to ensure we are providing the best client experience” Montemurro joined the team in 2011 and has been an important cog ever since. He’s now a director and portfolio manager responsible for managing and trading on behalf of all ETF and passive institutional fixedincome portfolios, as well as assisting with currency hedging for the BMO ETFs team. “The team dynamic is so unique and special,” he says. “There is a pride within the team; we want to make sure we are providing the best solutions for investors. Whether that is from a sales, investment strategy or portfolio construction perspective, there is a really unique desire to ensure we are providing the best client experience.”
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21/09/2018 9:58:35 AM
SPECIAL REPORT
Brought to you by
ETF INNOVATION
CHRIS MCHANEY Director, portfolio manager
CHRIS HEAKES Director, portfolio manager
Chris McHaney has been with BMO ETFs since 2009 and operates as a portfolio manager for equity-based and derivativebased mandates, encompassing Canadian, US, international and emerging market equities, as well as North American and European derivatives. McHaney co-manages various cross-asset portfolios, and he also trades foreign exchange contracts and equity options for mandates across the firm. “I focus primarily on our non-indexed, quasi-active mandates,” McHaney says. “In my previous role at BMO, I was responsible for mutual fund manager monitoring and selection, so I have a lot of experience with different investment styles on the active management side of things. Active ETFs have grown rapidly over the past few years, so that is where I have applied most of my experience.” McHaney believes the Canadian active ETF
space is well positioned for further growth, due to the fact that ETFs are regulated the same as mutual funds. “There is certainly room for more participants and further growth,” he says, “but the key is knowing which mandates will work well in the ETF format compared to a mutual fund.” As geopolitical unrest and trade wars bring a new level of uncertainty to global markets, McHaney believes sticking to highquality, blue-chip companies is the best bet for investors. “I think those investments will perform best over the next 10 years or so,” he says, “although I do not expect them to do as well as they have in the past decade.”
Chris Heakes is another member of the team who has been with BMO ETFs since the very early days. He joined the BMO group in 2008 after getting a master’s of finance from the University of Toronto and moved over to BMO GAM in 2010. Heakes is a portfolio manager of equity, derivatives-based and multi-asset portfolios, and he also trades equity options and foreign exchange. He started on the quantitative equities side in 2010 and shifted to focus on ETFs in 2011. “I have a very varied role and get to do many different types of work,” Heakes says. “On any given day, I could be looking at Canadian equities, emerging markets, EAFE, derivatives strategies or FX.” Heakes highlights the growth of the Low Volatility Canadian Equity ETF (ZLB) as one of his proudest career achievements. He played a key role in formulating the methodology of the fund and has seen it become a real success story with AUM of more than $1.5 billion. “It was an ETF that really grew on the
“On any given day, I could be looking at Canadian equities, emerging markets, EAFE, derivatives strategies or FX”
Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements.
fruits of its own success,” Heakes says. “It didn’t take off immediately, but slowly and surely investors have gravitated towards it. It has been really rewarding to see ZLB become one of top-ranked ETFs for Canadian equity exposures.” Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus before investing. Exchange traded funds are not guaranteed; their values change frequently, and past performance may not be repeated. For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the prospectus. BMO ETFs trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss.
BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management U.S. and BMO’s specialized investment management firms. BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and portfolio manager and separate legal entity from the Bank of Montreal. Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. ®BMO (M-bar roundel symbol) is a registered trademark of Bank of Montreal.
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21/09/2018 9:59:02 AM
SPECIAL REPORT
ETF INNOVATION
TREND WATCH
FACTORBASED ETFs AS CANADA’S third largest ETF provider in terms of assets under management, Vanguard Canada has consistently found new ways to offer both active funds and one-ticket solutions. “We believe it has never been passive or active – it has been both,” says Tim Huver, Vanguard’s head of product. “We believe that active and passive solutions can form a meaningful part of a portfolio.” In June 2016, Vanguard launched four factor-based ETFs, which are actively managed by its quantitative equities group: the Global Minimum Volatility ETF (VVO), which seeks to provide better risk-adjusted returns and protect against risks in equities; the Global Value Factor ETF (VVL), which attempts to outperform the market by buying into underpriced securities; the Global Momentum Factor ETF (VMO), which invests in companies that are showing momentum; and the Global Liquidity Factor ETF (VLQ), which invests in less liquid names that have a record of outperformance. “If you look at the Minimum Volatility ETF, that is looking to provide better risk
returns, while the other three are looking to outperform the market based on the performance of the single factors historically,” Huver says. While the packaging of such factor-based ETFs is relatively new, the academic research on the concept is extensive. Constructed around a set of rules, factor-based ETFs can be used in a number of ways – they can be implemented into a portfolio that has a growth overweight or used as a lowercost satellite.
“If you look at value, momentum and liquidity, there are three underlying attributes we use to come up with the universe itself: book-to-price ratio, forward-earningsto-price ratio and cash-flow-to-price ratio,” Huver explains. “Since they are actively managed, we look at them every day and rank the factors based on the underlying attributes.” Active strategies currently occupy close to 20% of the marketplace, and Huver believes this is an area that will continue to grow.
PERFORMANCE OF VANGUARD’S FACTOR-BASED ETFs From their inception in June 2016 until the end of August 2018, Vanguard’s factor-based ETFs have all shown net asset value growth ranging from 13.1% to 18.5%. One month
One year
A
Since inception
25 23.34%
20 18.51%
15 10
11.98%
18.12%
18.45%
16.47%
16.92%
13.11%
5 1.43%
0 -5
Global Minimum Volatility ETF (VVO)
-0.5% Global Value Factor ETF (VVL)
3.5% Global Momentum Factor ETF (VMO)
1.48% Global Liquidity Factor ETF (VLQ) Source: Vanguard Canada
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“We believe it has never been passive or active – it has been both. We believe that active and passive solutions can form a meaningful part of a portfolio” Tim Huver, Vanguard Vanguard is looking to carve out a niche in the space by creating low-cost options to rival higher-priced active funds. Still, Huver recognizes that the appeal of factor-based products is different for each investor. “I would say with active funds, there are three criteria for outperforming: a skilled manager, low cost and patience,” he says. “For investors who are willing to handle the volatility with active management, the factor products would be appropriate.” Launched earlier this year, Vanguard’s asset allocation ETFs – the Balanced ETF Portfolio (VBAL), Conservative ETF Portfolio (VCNS) and Growth ETF Portfolio (VGRO) – are another innovation. One of the fastestgrowing products in the industry, this ‘ETFs of ETFs’ strategy gives investors access to more than 25,000 individual equities and fixed-
income bonds. These low-cost asset allocation ETFs are passively managed and rebalanced within the fund. “They can be the core of a portfolio or a core satellite where you have active satellites around the core portfolio,” Huver says. “For an advisor, it can be a scalable solution for a number of broad clients.” Constructed entirely from Vanguard’s passively managed ETFs, the asset allocation ETFs aim to provide exposure to the entire market to give investors a one-ticket solution – meaning they could serve as an entire portfolio, Huver says, although he recommends incorporating both active and passive strategies to form the core and satellite of a portfolio. It is this combination that both Huver and Vanguard believe will continue to be vital to all investors’ portfolios.
TREND WATCH
LOWER FEES INCREASING ACCESS is an important goal of any provider looking to distinguish itself in the ETF industry, and Horizons ETFs has been on the cutting edge of offering unique opportunities for investors in the ETF space. Whether it’s through thematic ETFs focusing on emerging trends like marijuana (HMMJ), robotics (RBOT) or blockchain (BKCH), or products with a 0% management fee (HCON and HBAL), Horizons is giving investors access to more funds and sectors. Mark Noble, Horizons’ SVP and head of sales strategy, says the firm’s entry into both thematic ETFs and low-cost products was designed to help it compete in a market crowded with bigger players. “There has been a lot of coverage in the Canadian ETF space of the major asset classes,” Noble says. “Everyone is trying to capture the next big idea. When you look at the wellestablished asset classes, it is pretty crowded by providers, and that’s why you’re starting to see the race to 0% management fees. You need to look for new ideas and new products.” One of the best examples is Horizons’
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Individual Insurance and Annuities (2015–2017) and Chief Operating Officer (2017–2018). As President and Chief Executive Officer, Denis Ricard is a board member for iA Financial Group and for the group’s main subsidiaries.
Denis Ricard
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SPECIAL REPORT
ETF INNOVATION “If a lowcost option’s performance is on par, advisors will be forced to rationalize their decisions as to why they are choosing higherpriced options” Mark Noble, Horizons ETFs marijuana ETF, launched in April 2017, which has become somewhat of the benchmark for the sector. “The marijuana ETF is one of the fastest growing in Canada and now has over $1 billion in AUM,” Noble says. “At first there needed to be more stocks for diversification and liquidity for the ETF to trade; by April of 2017, there were. The second challenge was regulation – there were more regulations that needed to be signed off on, but once it launched, it became the same as any other ETF offering a one-ticket solution.” Horizons’ marijuana ETF has succeeded in attracting people to the sector. Noble reports that it has been embraced by direct clients buying through a discount brokerage, which reinforces the notion that it has offered access to even more investors. While Noble can’t say for sure what’s in store for the ETF, he does note that a lot of it depends on industry news. Even after the October 17 legalization, he believes the ETF could be in for more growth as large companies consolidate and invest in producers; he points to Constellation Brands’ recent move to invest in Canopy Growth as an example. “Large companies buying in provide a premium, so we may get a better idea 18 months from now,” he says. Another area where Horizons has taken
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the lead in the ETF space is offering funds with 0% management fees – it introduced two passive ETF portfolios in early August with no top-line management fees. For Noble, this was a straightforward decision, as reducing costs is a big selling point. “The products are a total return from a synthetic structure, meaning they don’t own bonds and allow for different taxation unless sold,” he explains. “There are still underlying fees on performance, but the 0% management fees drive down the overall cost. All-in, they are still 25 basis points.” These portfolios, he says, help to empower investors by eliminating any worries about added fees. “The benefit, in terms of indexing, is that cost is the biggest hurdle for investors.
WHAT DOES A 0% MANAGEMENT FEE REALLY MEAN? When it launched its 0% fee ETFs – the Horizons Conservative TRI ETF Portfolio (HCON) and the Horizons Balanced TRI ETF Portfolio (HBAL) – Horizons clarified that the 0% refers to top-line management fees. However, “unitholders still indirectly pay the management fees on the underlying Horizons TRI ETFs invested in by HCON and HBAL, which will determine what the management expense ratio is for HCON and HBAL,” the firm said. The initial MERs are 0.15% for HCON and 0.16% for HBAL, and Horizons has said they will never exceed 0.17% and 0.18%, respectively.
Having the option for a lower cost and higher return eliminates that.” This race to the bottom of the fee tier could be the next evolution of the industry. Noble believes Canada could see more ETFs with 0% management fees, minus taxes, in the coming years. “If a low-cost option’s performance is on par, advisors will be forced to rationalize their decisions as to why they are choosing higherpriced options. Sometimes they are justified if they want access to something specific. Ultimately, with many advisors moving to a fee-based model, advisors can reduce costs for clients and focus on other things like asset allocation and goals for money. In the big picture, reducing cost for their clients is a win-win.”
TREND WATCH
FIXED-INCOME ETFs BOND INVESTMENTS have been under considerable pressure lately. With interest rates on the rise, things are changing within the bond landscape. However, RBC Global Asset Management has evolved its bond products to offer fixed-income investors the opportunity for better rates of return than GICs – effectively giving investors a better return stream in addition to greater liquidity. RBC GAM has been offering ETFs since 2011; until 2014, the firm only offered fixedincome products. It launched its ETF suite with the Target Maturity Corporate Bond (TMCB) ETFs and moved into laddered bond
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21/09/2018 9:59:49 AM
SPECIAL REPORT
ETF INNOVATION
“Spending time on fixed income can mean spending less time managing equities, financial planning or gathering assets, and it becomes an expensive proposition from a time perspective” Trevor Cummings, RBC Global Asset Management products. While RBC GAM does now offer actively managed solutions, the TMCB series remains the core. Trevor Cummings, head of business development for ETFs at RBC GAM, believes these types of products can help investors and advisors whose strengths are on the equity side of the market. “In my experience, most investment professionals’ forte lies on the equity side of the portfolio,” Cummings says. “If they need fixed-income products for an investor, spending time on fixed income can mean spending less time managing equities, financial planning or gathering assets, and it becomes an expensive proposition from a time perspective.” RBC’s TMCB ETFs are index products that follow FTSE Canadian Bond Indices. “What we do as the provider is follow suit and mimic the index the same way a competitor might follow the S&P 500 Index or the TSX Composite Index,” Cummings says. “How those indices work is they target specific
bonds – a collection of bonds that mature in a given calendar year, screened for issue size, liquidity, tradeability and credit quality.” The prices of the TMCB ETFs are close to par, and in some instances even trade below par value, for the bond portfolio. “Unlike buying bonds or bond ETFs several years ago, where you were looking to get your
coupon but your price would go down, there are more options today,” Cummings says. “You can buy a bond ETF, get your coupon while you invest in that ETF, and if you hold it to maturity, there are some capital gains that are likely in the portfolio.” The success of the TMCB suite led RBC to introduce Laddered Corporate Bond ETFs when they noticed investors were essentially building their own ladders with TMCB components. “It is sort of a labour savings, as there is no additional fee to purchase the ladder versus components,” Cummings says. “It makes it easier for investors because they can set it and forget it.” The advantage to both the TMCB suite and Laddered Corporate Bond ETFs is that they are specific and targeted. “Because the TMCB ETFs follow specific indices, you know exactly what you are going to get and what you are not because we are following the rules of that index in managing the ETF,” Cummings says. “The ladder takes labour, cost or effort savings one step further.” Cummings says these products may not be the end-all solutions for all investors. That’s why RBC GAM also has active fixed-income solutions like the US Corporate Bond strategy and the Diversified Global Monthly Income ETF. However, for investors and advisors looking to add fixed-income solutions to their portfolios, the TMCB and Laddered Corporate Bond ETFs can make the process easier and less time-consuming.
SECTOR ALLOCATION OF THE RBC 1-5 YEAR LADDERED CORPORATE BOND ETF
64.9%
7.0%
10.4%
5.2%
9.4%
3.1%
Financial
Corporate bond sector allocation
Communication Energy
Industrial
Infrastructure Real estate Source: RBC Global Asset Management
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TREND WATCH
AN ALTERNATIVE EXCHANGE BACK IN March 2016, Invesco became the first provider to launch on the Aequitas NEO Exchange with its DWA Global Momentum Index ETF (DWG). It was a bold move, but one Invesco considered important to encourage greater diversity in the industry. “Exchange diversification is an important element of Invesco’s ETF listing strategy,” explains Christopher Doll, vice-president of ETF sales and strategy at Invesco. “Adding exchange partners encourages continuous innovation and fosters stronger competition within Canadian capital markets. This should lead to a better experience for clients.” The NEO Exchange uses a blueprint that prioritizes investors, dealers and businesses looking to raise capital. It offers an innovative trading venue and a value-added listing venue for companies and investment products. As a firm that has always prized innovation and strategy, Invesco felt that creating a partnership with the NEO was a no-brainer. “Invesco has always been at the forefront of innovation,” Doll says. “It’s in our DNA, and the partnership we have cultivated with NEO from the very beginning has been part of our overall philosophy.” Since its first listing, Invesco has expanded to four ETFs on the NEO, including the Invesco 1-10 Year Laddered Investment Grade Corporate Bond Index ETF (PIB), the Invesco S&P Global ex Canada High Dividend Low Volatility Index ETF (GHD) and the Invesco Long-Term Government Bond Index ETF (PGL). While Invesco was the first, the NEO now boast several ETF providers and numerous products. “What’s really been impressive is the mass adoption of NEO as a viable listing venue by other ETF providers,” Doll says. “There are now 59 tickers across 39 products from nine different ETF providers listed on the NEO Exchange.”
“Adding exchange partners encourages continuous innovation and fosters stronger competition within Canadian capital markets. This should lead to a better experience for clients” Christopher Doll, Invesco Doll notes that Invesco still has multiple products listed on the TSX, but he believes listing on the NEO will only improve quality in the industry. “Competition in any industry helps foster innovation, better customer service and cost reduction – all things that factored into our initial decision-making process,” he says. While an alternative exchange is a great option for providers as they look to distinguish themselves from bigger firms, Doll points out that where an ETF is listed shouldn’t factor into whether an advisor includes that fund in their portfolio. “The primary drivers for selecting ETFs include investment exposure, investment strategy and objectives, liquidity, and cost,” he says.
FAST FACTS: NEO EXCHANGE Launched March 2015 Owner Aequitas Innovations Number of ETF listings 39 Number of ETF providers 9
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ETF INNOVATION
TREND WATCH
STRATEGIC BETA ETFs Strategic beta is one of the fastest-growing segments of the ETF industry. Boasting a combination of traditional indexing and active management, strategic beta ETFs are becoming more popular as core investments that can prove to be dynamic and lucrative to investors. Michael Cooke, senior vice-president of ETFs at Mackenzie Investments, highlights how the firm’s strategic beta ETFs are using technology that analyzes risk exposure and ensures a diversified ETF. “The solutions are index-based and are governed by a clear and transparent set of rules that inform the construction of the portfolios,” Cooke says. “Strategic beta is effectively blending together traditional capitalization of indexing and active management.” Mackenzie first launched its ETF suite in
financial services or resource sectors, the risk factors that drive the performance are fairly narrow,” Cooke says. “As such, we are overexposed to a small subset of risk factors that dive the returns of the Canadian stock market. If we could find a more equitable
“Strategic beta is effectively blending together traditional capitalization of indexing and active management” Michael Cooke, Mackenzie Investments April 2016 and now offers 28 different ETFs, which account for $2.8 billion in assets under management. That includes six strategic beta ETFs that range from emerging markets to developed Europe to US equity indices. To offer strategic beta ETFs, Mackenzie has partnered with TOBAM, which is responsible for the intellectual property behind Mackenzie’s Maximum Diversification Index Series. The ETFs are built by analyzing volatility at the single-stock level. Risk factors that drive performance are determined, and then exposure to certain industries is adjusted. “If we look at the Canadian market, specifically the abundance of companies in
blend of representation across a broad array of risk factors, we still have exposure to financials and resource companies, but we have diversified away from an overconcentration to those risk factors.” Mackenzie’s strategic beta ETFs cover an entire spectrum of equity markets, meaning investors get a broad range of exposure to a particular market and are earning the full premium to assume that risk. “Where we differentiate is allocation to all known and unknown risk factors,” Cooke says. “Sometimes a portfolio is prone to too much exposure in a very narrow set of risk factors. What might appear on the surface to be a
THE MACKENZIE MAXIMUM DIVERSIFICATION EMERGING MARKETS INDEX ETF (MEE) Launched January 23, 2017 Net assets $141,171,261 Underlying index TOBAM Maximum Diversification Emerging Index Rebalance frequency Quarterly Distribution frequency Semi-annual Number of equity holdings 376 Source: Mackenzie Investments, as of August 17, 2018
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LEADERSHIP DEMANDS
ACTIVE ALTERNATIVES THE NEXT EVOLUTION IN PORTFOLIO CONSTRUCTION At Dynamic, we are active in the pursuit of portfolio construction excellence – especially as our industry evolves. Learn how to navigate the emerging world of alternatives with confidence to benefit from:
DIVERSIFICATION Alternatives have low correlations to traditional asset classes
DOWNSIDE PROTECTION Alternative strategies can help mitigate risk in times of volatility
ACCESS TO ADDITIONAL SOURCES OF POTENTIAL RETURNS Incorporating alternatives into a portfolio may offer access to return sources beyond those of traditional investment solutions
DISCOVER ACTIVE ALTERNATIVES
dynamic.ca/active
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Dynamic Funds® is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P.
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SPECIAL REPORT
ETF INNOVATION
diversified portfolio is not if you look at the risk factors that impact the return profile of that market.” The strategy in the Maximum Diversification Series encompasses a broad array of exposures. “They are not single-factor strategic beta products,” Cooke says. “They are core strategies that blend together different elements to arrive at this patented rulesdriven approach that has delivered better risk to returns over time.” One ETF in the series that is particularly interesting is the Mackenzie Maximum Diversification Emerging Markets Index (MEE). Cooke notes that it’s important to distinguish between the short and long term with these types of investments. “Despite more inherent risk, on the basis of geopolitics or the emerging nature of economies, you are subject to more volatility in the short term,” he says. “Long term, these growth characteristics show that you will be rewarded with returns in an equity portfolio.” Cooke outlines that the more inefficient the market, the more possibility a strategic beta portfolio has to generate alpha. That maximum diversification approach can smooth out volatility and help investors stay engaged in allocating toward emerging market equity. For advisors looking for an appropriate blend of risk management, fee budgeting,
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liquidity, transparency, access to a particular market and a solution that can manage risk in a cost-effective fashion, strategic beta solutions are becoming an enticing core option for portfolios.
TREND WATCH
THEMATIC ETFs The investor landscape is changing: Huge amounts of money are about to transfer from baby boomers to millennials. This new gener-
ation of investors has different priorities than those who preceded them. For millennials, it’s important to invest in sectors and companies that mean something to them – and that has made certain underserved sectors a new frontier for ETF providers. Industry veteran Raj Lala says that was his motivation when he founded Evolve ETFs in 2017. “I asked myself if there was room for another issuer,” he says. “I thought if I put together a creative product and a good strategy, there would be room to compete.” That’s just what he did, targeting underserved sectors with thematic ETFs, which are designed to prioritize specific themes or issues in a portfolio. Evolve’s four base thematic ETFs are the Evolve Cyber Security Index ETF (CYBR), the Evolve North American Gender Diversity Index ETF (HERS), the Evolve Automobile Innovation Index ETF (CARS) and the Evolve Innovation Index ETF (EDGE). “Through these ETFs, advisors and clients can have a specific view on an area of the market and enhance the overall potential for alpha in their portfolio,” Lala says. Evolve has been the first provider in Canada to target cybersecurity, gender diversity and innovation, and the first globally to target the auto industry. “When you look at cybersecurity and gender diversity, we have
EVOLVE’S PUSH FOR GENDER DIVERSITY Evolve ETFs was the first provider to offer a gender-specific thematic ETF in Canada: the Evolve North American Gender Diversity Index ETF (HERS). Here’s how the fund’s underlying index stacks up to the broader North American market in terms of female representation: PERCENTAGE OF POSTS HELD BY WOMEN 40%
Index
Non-index
38.3% 30% 20% 10% 0%
34.8% 26.0%
24.0%
21.5% 16.5%
Non-executive board
25.4%
12.7% Executive board
Senior management
Workforce
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“You can express a certain view in an area of the market without having to pick single companies. The ETF provides a onestop proxy on that specific theme” Raj Lala, Evolve ETFs noticed an increase in the demand,” Lala explains. “They are areas in which we don’t see the trends reversing. “When it comes to CARS,” he continues, “we see self-driving and electrification as a big part of the future. It’s not a matter of technology but rather legislation. When you consider the demographics of the investors who are about to inherit the world’s wealth, they want their investments to have an impact in those areas.” Lala notes that when it comes to thematic ETFs, it’s important for advisors and investors to take a long-term approach, which is something his firm does when constructing the products by focusing on where the global market is going and not on fads. All four of Evolve’s thematic ETFs are passive index-based products. For CYBR, EDGE and CARS, Solactive AG provides the index, while a FactSet classification system determines which companies fall into the category. “We use this classification service to determine if a company is involved in cybersecurity,” Lala explains. “If they are part of that FactSet universe – in the case of cybersecurity, there are about 30 positions – they make up the CYBR ETF.” In the case of HERS, Evolve is a little more involved. Solactive is still the index
provider, but Evolve has partnered with Equileap to create the methodology to determine which companies are most proactive with gender diversity. For Lala, the biggest advantage of investing in thematic ETFs is that it can allow investors an opportunity to practice values-based investing without sacrificing diversification. “You can express a certain view in an area of the market without having to pick single companies,” he says. “The ETF provides a one-stop proxy on that specific theme. A great example would be CARS and the recent example of Tesla. Six months ago, if we talked to someone about the future of the car industry, many might say they don’t need a CARS ETF because they’re going to buy Tesla. Obviously that may not have been such a good idea, and that’s why you want to take a diversified approach to a theme.”
TREND WATCH
STANDING OUT IN THE MARKET As the ETF industry continues to grow at a rapid pace, it’s becoming more and more challenging for smaller firms to get in. It’s no
longer enough to show advisors and investors why an ETF is slightly better – there needs to be something that differentiates the product, or else it will struggle to gain traction in the marketplace. One person who knows this scenario all too well is Som Seif, the president and CEO of Purpose Investments, who has launched two successful ETF companies. After selling his previous firm, Claymore Investments, to BlackRock, Seif was inspired to start Purpose after noticing a void in the market for products that could manage risk, help clients with outcomes, and help advisors build better portfolios and target specific areas. “I built it on the principles of how do you pick the best of what active money management does and passive indexing and put it together?” Seif says. The strategy clearly worked: Today, Purpose has nearly $6 billion in assets. One of the things that makes Purpose unique is its fund offerings – the firm doesn’t look at a fund as being just an ETF or a mutual fund, but rather considers its ability to be both. Purpose currently offers more than 50 funds across numerous asset classes, 30 of which have an ETF option – something that was unique in Canada when Purpose started offering it.
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ETF INNOVATION “ETFs are just mutual funds that trade, and our opinion is when someone is investing, they are looking for the best strategy in the most efficient format for them” Som Seif, Purpose Investments “ETFs are just mutual funds that trade,” Seif says, “and our opinion is that when someone is investing, they are looking for the best strategy in the most efficient format for them. ETFs are one vehicle, but other types of investors think mutual funds are better.” Purpose has introduced numerous other innovations, including real assets, hedged equity, and long and short equity strategies. “All of these things are very unique to us, as we are the first firm in Canada to do these things and offer a transparent and public prospectus forum available for all investors,” Seif says. One area Purpose has specialized in is structured pension funds. “We built a suite of resilient pension-style portfolios,” Seif says. “Some are based on allocation decisions, and some follow a quantitative process, but all are designed to give investors more stable ways to get returns like a pension plan would. They hold traditional asset classes like equity and fixed income, along with alternative assets and other income strategies, all designed to drive down risk and manage a more steady return.” Purpose has four of these products, which are designed as an alternative to a conservative investment strategy. Seif explains that traditional conservative strategies tend to
focus too much on bond exposure, a risky part of the market today. His strategies use more of a risk management approach to generate similar returns to bonds without the same interest rate exposure. When applying such unique strategies, Seif says Purpose’s goal is to focus on the outcome and base strategies on what they hope to accomplish from a risk/reward perspective. That includes taking advantage of market exposure on a risk management basis or
implementing an alternative strategy. Seif believes smaller firms need this type of innovation to differentiate themselves and stay relevant. “Adding value beyond just adding market benchmarks and indexes – that’s where smart innovation can help you differentiate yourself,” he says. “When you are able to bring real value-added innovation through thought leadership, I think investors win in the end, and that is the most important thing.”
SECTOR ALLOCATION OF THE PURPOSE PENSION PORTFOLIO FUND
32.98%
10.82%
18.52%
6.03%
11.97%
5.60%
Financials
Consumer discretionary
Purpose Pension Portfolio Fund sector breakdown
Equity ETFs and mutual funds
11.48%
Utilities
Healthcare
Information technology
3.98%
Materials
Fixed-income ETFs and mutual funds
11.09%
1.27%
Energy
Industrials
Source: Purpose Investments, as of October 31, 2017
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PEOPLE
PORTFOLIO MANAGER
Time to get active Harvest Portfolios’ Paul MacDonald tells WPC how he’s using his industry insight to help the firm make its mark in the active ETF space
IN HIS 16 years in the investment industry, Harvest Portfolios CIO Paul MacDonald has already achieved some impressive milestones – and as the firm emerges as a leading active ETF manager in Canada, MacDonald is ready to help Harvest hit new heights. After graduating from Griffith University in Australia in 2001, MacDonald began his career at Raymond James, certain that this was the industry for him. “Getting into the financial industry was always a path I wanted to go down,” he says. “I wanted to focus on global, so that’s why I did a degree in international finance. It’s where my passion has been and continues to be.” At Harvest, MacDonald heads up a team of highly specialized portfolio managers with expertise in technology, financials, REITs, resources, US and global equities, and healthcare. The team is made up of seasoned experts with long records of success at industry leaders like Raymond James, RBC and TD, and this strong backbone is crucial to enabling Harvest’s ETF business to continue growing at such a rapid pace. MacDonald has witnessed his fair share of change during his time in the industry, but he highlights one very modern challenge that’s creating a new obstacle. Today’s investors
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have more access to market and company data than ever before, and MacDonald believes this influx of information is creating spikes in short-term volatility. As a result, it’s difficult for investors to cut through the noise and differentiate between investment options. “That’s a challenge investors will continue to be faced with,” he says. “Our philosophy at Harvest is to actively generate income by focusing on quality large-cap companies that are well positioned for long-term growth. It’s how we have carved out our niche.” One of the sectors where Harvest excels is healthcare. Under the firm’s umbrella is one of the top-performing health ETFs in Canada, the Harvest Healthcare Leaders Income ETF (HHL). Invested in an equally weighted portfolio of equity securities from 20 healthcare issuers, the fund focuses on companies that have a minimum market cap of US$5 billion. So far, HHL is achieving its goals of capital appreciation, monthly cash distributions and minimized volatility. “I am absolutely fascinated by some of the investment developments and human developments in the healthcare sector over the past couple of years,” MacDonald says. “It’s exciting to be so involved in the space at this point in our development and evolution.”
MacDonald says the biggest change he’s seen since joining Harvest has been the evolution of ETFs. After starting out doing closed-end funds, the firm has transitioned seamlessly into a key player in the actively managed ETF space. By focusing solely on quality equities, offering healthy payouts and supplementing that with an options strategy, Harvest has been able to grow its ETF business to almost $600 million in AUM in under two years. Harvest has also developed a call-optionwriting strategy, which makes the firm’s suite of funds more tax-efficient by generating premium income that’s treated as capital gains. Because the portion of equities that have been written on have the downside protection of the premium collected, the call-writing
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WHO IS PAUL MACDONALD? Role: Chief investment officer at Harvest Portfolios Industry pedigree: Prior to joining Harvest in 2013, MacDonald spent time as an associate at Raymond James, as a VP and portfolio manager at Creststreet Asset Management, and as a VP and portfolio manager at Mavrix Fund Management, where he managed a Lipper Award-winning fund. Education: MacDonald holds a degree in international finance from Griffith University in Australia, along with a CFA designation. Strategy: “With all the new investment products, it can be difficult for investors to navigate. The focus for me is on investing in quality businesses, mitigating risks and actively generating equity income.”
“Our philosophy ... is to actively generate income by focusing on quality large-cap companies that are well positioned for long-term growth. It’s how we’ve carved out our niche” strategy also helps reduce a fund’s volatility. For example, if the fund buys a stock at $50 per share and sells a call option that pays a premium of $2 per share, if the stock price declines, the fund is $2 per share better off than the fund that didn’t write calls. There are four components to the Harvest call-writing strategy: a flexible write mandate, flexible write level, flexible multiple strike levels and flexible timing. The strategy has
been central to Harvest’s recent expansion. “Covered calls capitalize on capturing current income,” MacDonald says, “but we also use fundamental evaluations to actively make tactical decisions around positions. Our turnover tends to be low, based on our qualifiers to get down to our 20 positions in our funds, but there are times when we will eliminate a position for fundamental reasons.” When it comes to the current market land-
scape, MacDonald believes the market is gradually transitioning from a mid- to late-cycle environment. However, he believes the backdrop is still robust, and he won’t allow negative noise to become an area of focus – although he does foresee some increased market volatility in the autumn months. “That opinion segues into what we are doing right now: We are focused on goodquality companies and high-grade portfolios,” he says. “I think we are well positioned from a market timing perspective.” That rigorous investment strategy falls in line with the philosophy made popular by Warren Buffett: tuning out the market noise and focusing instead on companies with good business fundamentals. Or, as MacDonald puts it: “Focus on quality and remember that the further you get away from a core strategy, the more risk you are taking.” It’s a philosophy that has served both MacDonald and Harvest well so far.
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SPECIAL PROMOTIONAL FEATURE
PLANNED GIVING
The benefits of planned giving Abundance Canada can help your clients make even the most complex donations to charity
CHARITABLE GIVING is important to Canadians – roughly 82% say they donate to charities in some form or another. From cash donations to estate and asset gifts, the 2013 General Social Survey on Giving, Volunteering and Participating estimated that Canadians
Abundance Canada formed back in 1974 as the Mennonite Foundation of Canada. The organization saw a need for charitable gift facilitation, as well as a way for donated funds to be held and disbursed. In 2016, a rebrand as Abundance Canada
“What we are seeing is people thinking critically about what they want to support, how they want to do it and matching it with their assets” Darren Pries-Klassen, Abundance Canada donate approximately $12.8 billion each year. It’s a large sector: There are more than 85,000 registered charities in Canada and an additional 70,000 non-profits. With numerous options on where money can go, there are equally as many questions and scenarios that need to be addressed. That’s what Abundance Canada attempts to do by providing services to make planned giving easier for all donors.
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helped the organization enlarge its scope to reach anyone who wanted a more strategic approach to planned giving. “Planned giving is the intentional process of looking at what a client wants to do by way of philanthropy and generosity, then systematically looking at what their interests and objectives are and matching that with timelines and assets,” says Darren Pries-Klassen, CEO of Abundance Canada. “There’s nothing
wrong with being spontaneous and giving to charity, but what we are seeing is people thinking critically about what they want to support, how they want to do it and matching it with their assets.”
An organized approach to giving Abundance Canada offers a customized approach based on each client’s needs. Many families are looking to pass on a set of values to the next generation, and planned giving is a way to get them involved. Abundance Canada also works with financial planners, accountants and lawyers to plan the gifts accordingly. “What makes us unique is that we are not fundraising for one particular organization,” Pries-Klassen says. “We have no vested interest, so we can work on behalf of the individual. The contributions we make to charities are because individuals have donated the funds to us. We take our cues from those individuals to determine timelines and how to distribute the funds.” One of the big advantages of using Abundance Canada is that clients can remain anonymous if they choose. “Many times people don’t care for the attention that comes with making a gift to charity, and by making the gift with us, we can maintain confidentiality,” Pries-Klassen says. “Other people like the recognition or it fulfills a pledge to a particular charity. By notifying the charity a gift is coming through us, it fulfills that pledge.” With Abundance Canada, donors don’t have to worry about reporting, filing with the CRA or putting a board of directors together like they would with a private foundation. “They get all the benefits of having a private foundation without the mechanics of putting a private foundation together,” Pries-Klassen says. “Through Abundance Canada, we become their back office, and the individual can have the fun of making the donations to the charities they want.” Another plus to going through Abundance
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CHARITABLE GIVING IN CANADA
82%
of Canadians made donations to a charitable or non-profit organization in 2013
$12.8 billion
was donated to charity in Canada in 2013
41%
of donors gave to religious organizations
12%
gave to social services organizations
13%
donated to health organizations
Canada, Pries-Klassen says, is that it can hold donated funds and time their release appropriately. “It’s not uncommon for us to deal with an individual who needs to make a donation to charity because of their economic reality,” he says. “They just aren’t sure which charity, or they know which charity but they don’t want to make the gift just yet. By working with us, the donor is in the position to make the donation today, get the charitable receipt and leave the funds on deposit until they are ready to disburse.”
The advisor’s role Abundance Canada offers many services for donors, from simple online cash donations to some of the more complicated aspects like appreciated stocks and securities, proceeds from life insurance policies, RRSP and RRIF benefits, private company shares, and end-of-life giving. “A lot of people may want to give to charity, but during their lifetime, they may not be in the position to,” Pries-Klassen says. “When they can donate from their asset base,
91%
of donors said they gave because they felt compassion toward people in need
48%
of donors reported that they planned to claim a tax credit for their donation Source: General Social Survey on Giving, Volunteering and Participating, 2013
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SPECIAL PROMOTIONAL FEATURE
PLANNED GIVING
FAST FACTS: ABUNDANCE CANADA
Established in 1974 as the Mennonite Foundation of Canada
Rebranded as Abundance Canada in 2016
Headquartered in Winnipeg
Member of the Canadian Council of Christian Charities and the Canadian Association of Gift Planners
Facilitates gift and estate planning; family foundations; flexible gifting accounts; gifting stocks, shares or mutual funds; gifting with an endowment; and gifting with RRSP/RRIFs
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they are able to make a more sizeable gift.” Dealing with these more complicated donations is where Abundance Canada tends to work in concert with financial advisors. In 2017, the organization received $39.4 million in donations, $25.1 million of which was in publicly traded securities. “Often someone is looking to donate publicly traded stocks or securities,” PriesKlassen says. “We may have conversations with the advisor on what the client wants to do, the best way to do it and the timing of how the gift should be made. Depending on the size and timing, we are able to allow the advisor to maintain the management of the fund. Our job is to work on behalf of the donor to make the gift, but work in conjunc-
Abundance Canada works with clients of all different asset sizes; Pries-Klassen believes that Abundance Canada’s role in charitable giving isn’t necessarily about managing large gifts, but rather ensuring that donations are made in line with an individual’s beliefs. “I think it is determined by people who have a value system or want to give back to charities they have had some involvement with and to find out what options are available,” he says. “We can do some of the legwork on behalf of the client, maintaining their confidentiality and asking questions. Most times clients know which charities they want to benefit. The questions that might remain are what the best timing is
“[Clients] get all the benefits of having a private foundation without the mechanics of putting a private foundation together” Darren Pries-Klassen, Abundance Canada tion with the professionals.” Pries-Klassen encourages advisors to have conversations about philanthropy with their clients. It’s something he believes should be part of the broader conversation around a client’s financial plan. “I appreciate that it can seem counterintuitive to advisors who have commissions or trailer fees,” he says, “but the planners we’ve chatted with who have made the commitment to incorporating discussions on philanthropy with their clients have said it’s amazing what it has done for their book of business.” It is that value-add that Pries-Klassen sees as one of the biggest reasons for an advisor to advocate for planned giving. He sees it as a way for advisors to maintain relationships with clients and their family and to continue providing services to future generations.
or if there is something specific where the charity needs help. Clients want to make sure they are maximizing the impact the gift can have.” Pries-Klassen notes that while Abundance Canada would never discourage anyone from donating directly to a charity, he likens it to having two different pockets: making donations from income, which could be smaller and more frequent, or donations from assets, which are fewer but larger. “That’s where the planning comes in and is a benefit of working with us,” he says. “We offer anonymity and timing flexibility. We can have donations distributed six or seven times to create an income stream rather than a one-time gift. Working with a public foundation like us can help clients achieve any of their donation goals, which are a benefit for both the donor and the recipient.”
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SPECIAL PROMOTIONAL FEATURE
INDUSTRIAL REITs
Jump into e-commerce
As e-commerce continues to grow, industrial REITs present a less risky way to participate in the sector, according to the Middlefield Group’s Dean Orrico
CONSUMERS CONTINUE to flock to online retailers like Amazon, eBay and Alibaba for their shopping needs over brickand-mortar retailers, but for some investors, investing directly in these online companies provides too much risk. That’s why the Middlefield Group has taken a different approach – investing in e-commerce by targeting industrial REITs. Middlefield has been involved in real estate since its beginnings in 1979. After starting life as a developer and financier, Middlefield became more involved in investing in publicly traded real estate in the mid-1990s. To this day, the firm sees real estate as one of the best assets to invest in, primarily through REITs. In the past 10
years, Middlefield has launched not only diversified funds that incorporate real estate, but also dedicated real estate funds. “We think real estate can do well in a portfolio during both economic contractions and expansions,” says Dean Orrico, Middlefield’s president and chief investment officer. “We continue to be in an expansion, and so we have good exposure to real estate in our funds. What has been driving part of the expansion is what’s been going on in the technology and e-commerce sector.” Orrico notes that in 2017, e-commerce accounted for 10% of global retail spending – close to $2.5 trillion – and he believes the trend will continue to grow in the next four years.
“The way you can play that is by buying the Amazons, Visas and all the players doing well on the back of e-commerce,” he says. “However, we came to conclude that a way to do it in the real estate area is to buy industrial REITs.” Orrico explains that for every online purchase, not only does a product need to be made by a manufacturer, but it also needs to get to a consumer’s home. That’s where he sees value in industrial real estate. “Companies that own industrial real estate that have tenants that are in warehousing, freight, logistics, distribution and transportation are doing extremely well on the back of e-commerce,” Orrico says. He adds that there are a number of other ways that e-commerce could occupy more of that industrial space, including cloud technologies, software producers and payment systems. Investing in industrial REITs can be an ideal option for investors who have a lower risk tolerance. “It can be a good play because there is less volatility,” Orrico says. “They may not offer the upside of an e-commerce software company, but they also provide much less downside. Industrial REITs also produce income for investors. It really goes back to the theme that e-commerce is real and will continue to grow, and investors need to find a way to participate.” The current trends in both e-commerce and industrial real estate are something Orrico has observed not only in North America, but across the globe. He still sees room for growth because he believes industrial real estate will continue to outperform other sectors for the foreseeable future. “We have been participating in these industrial REITs, and they have been a major driver behind the outperformance we have had in our real estate funds,” he says. “We have been overweighting industrial REITs and underweighting the traditional retail REITs, shopping malls, power centres, etc., because they are the ones losing some of their sales and activity to e-commerce players.”
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PEOPLE
ADVISOR PROFILE
Building lasting relationships Portfolio manager Francis Sabourin’s approach to client relationships has helped him achieve his dream of helping people plan their financial lives
FROM AN early age, Francis Sabourin knew he wanted to help people by making their tough financial decisions a little easier. Now, 26 years into his career, Sabourin has achieved just that. “At 15 years old, I knew I wanted to help people as a financial advisor,” he says. “When I went to CEGEP, I felt I needed to work in a financial institution. I spent my summers working as a bank teller at National Bank. I learned a lot about the industry, including that it was not just a business-to-people industry, but really a people-to-people one.” After gaining a good basis for a career in the financial industry, Sabourin went on to graduate from McGill University with a degree in economics and finance. He then earned his financial planner certification and began his career in 1992 at Planification Plus. “It was a small office – I really wanted to avoid bigger firms when I started out,” he says. “I wanted to be in a smaller shop where I could be hands-on and grind my way up.” Sabourin went on to work at Group Option Retaite and CIBC Wood Gundy before settling into his current role at Richardson GMP, where he serves as director of wealth management and portfolio manager. He has found great success there, receiving multiple Wealth Professional Awards and the Distinguished Advisor Award from Finance et Investissement.
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His vast experience in financial planning has led Sabourin to a unique approach that he’s dubbed Vision, Planning and Guidance [VPG]. “I really want to put clients at ease in something that is not always an easy subject,” he explains. “I want to make it simple and understandable.” Using the VPG approach, Sabourin first figures out his client’s goals, values and objectives. Defining those objectives is critical to establishing the ‘vision’ component of VPG. From that vision, he is able to build his clients’ plan, focusing on preservation of wealth. Finally, he connects the dots to guide a client’s portfolio throughout the different stages of their life. This approach has allowed Sabourin to build strong relationships with his clients. “This business is all about building trust,” he says. “You cannot buy trust – the only way is to make sure your clients know you well.”
Over the years, Sabourin has noticed many changes in the industry, perhaps none bigger than the evolution of technology. As someone who specializes in wealth planning, he began implementing software and projections early on. “With my background in economics and finance, I felt I had a big advantage,” he says. “I was able to build projections that the clients loved seeing.” Thanks to those projections, Sabourin has been able to incorporate his view of the market and his own outlooks into his clients’ portfolios. Currently, that view is focused on trying to reduce risk to try to insulate client portfolios against issues like tariffs that have the potential to impact the global economy. “Now is not the time to be all in,” he says. “Portfolios need to be diversified, and the way we see that is through alternative investments. They are a big part of my strategy to counterbalance portfolios.”
TIME TO REDUCE RISK Since last June, Francis Sabourin has been working to reduce the risk in his clients’ portfolios. Although the economy has had a good run over the past 12 months, he predicts the market could see some setbacks in the fall, which he attributes to US president Donald Trump and a potential tariff war. While he doesn’t see a full-fledged recession in the cards, Sabourin believes now is a good time to take some profits. As such, he’s rebalanced portfolios by selling equities and adding alternatives to generate cash flow and appreciation and help offset risk.
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FAST FACTS: FRANCIS SABOURIN
PRACTICE Francis Sabourin Wealth Management at Richardson GMP
YEARS IN THE INDUSTRY 26
EDUCATION BA in economics and finance from McGill University
“This business is all about building trust. You cannot buy trust – the only way is to make sure your clients know you well” Whether responding to the market or new regulations, Sabourin believes the best quality an advisor can have is flexibility. “A good advisor needs to adapt,” he says. “At Richardson GMP, we are very flexible to new trends and always exploring what is best for our clients. For example, we were on time delivering our reports to our clients for CRM2 requirements, and I think it’s an added asset.”
A lot of Sabourin’s success has been built on the lessons imparted by his parents, who taught him patience and the importance of learning from his mistakes. And of course, hard work has been essential as well. “If you work with passion, life and this business will be good,” he says. “Be flexible and have an open mind. This is an amazing job that allows you to help people. If you do right, good things will follow.”
APPROACH VPG: Vision, Planning and Guidance
AWARDS Wealth Professional Award for Global Portfolio Advisor of the Year (2016, 2017), Wealth Professional Award for Portfolio/ Discretionary Manager of the Year (2018), Finance et Investissement Distinguished Advisor Award (2016)
www.wealthprofessional.ca
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SPECIAL PROMOTIONAL FEATURE
NOUR PRIVATE WEALTH
Declaring independence Elie Nour, CEO of Nour Private Wealth, tells WPC why he decided to launch as an independent dealer and what benefits his clients will see as a result
ON SEPTEMBER 14, Elie Nour celebrated the launch of his firm, Nour Private Wealth [NPW] as an independent IIROC dealer with offices in three locations: Montreal, Oakville and Toronto. Now that the firm is independent, Nour has partnered with Fidelity Clearing Canada for all back-office, trading and reporting activities. Nour is excited about the new direction of the firm and the opportunities it will
expand his business and grow his reputation. “I like to think that I lead by example, and that has resulted in other advisors wanting to learn from my methods, which continues to provide me with a great deal of satisfaction,” Nour says. “One became two, two became four, and in no time, I had built a team of 22 in Montreal.” That growth was instrumental for Nour, who began getting more referrals from outside
“Many investors have outgrown the ‘off-the-shelf ’ and ‘prepackaged’ investment solutions ... We realized it was time to evolve and build a firm with a more sophisticated investment platform” Elie Nour, Nour Private Wealth bring to clients. The decision to launch as an independent dealer is something he’s been thinking about for a while. He originally started his career at Berkshire Securities back in 2005. The firm later became part of Manulife Securities, where Nour continued to
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of Quebec. His first client from outside the province was located in Oakville, Ontario, which led to more clients in the city. Before he knew it, Nour was visiting Oakville every other week, hosting seminars and signing on new clients. In 2013, he decided to move his
family to Ontario and continued building his team in Oakville. The business kept expanding in both offices, and Nour watched his team grow to 70. “Over the past few years, the needs and expectations of Canadian families have been growing,” Nour says. “Many investors have outgrown the ‘off-the-shelf ’ and ‘prepackaged’ investment solutions. Their financial needs have become a lot more complex as well. We realized it was time to evolve and build a firm with a more sophisticated investment platform while continuing to focus on a more personalized service with deeper expertise. “We wanted to do it right,” he continues, “so we took our time in building a strong foundation while hiring the best people for the job. Finding the right people was a challenge for me. In today’s environment, maintaining compliance with evolving regulatory requirements is imperative. We needed to have the right people in place. We hired top veterans in the financial industry to occupy the positions of chief compliance officer and chief financial officer to oversee and protect our clients and the company.” Nour met with several financial institutions to select a firm to provide back-office support before deciding to go with Fidelity. “Fidelity has a stellar worldwide reputation as a pioneer in the world of investing,” he says. “I was impressed with their advanced platform and their professional staff. Having access to their state-of-the-art technology will completely transform the way we do business.”
New offerings As an independent firm, Nour says NPW will be able to significantly expand the services and products it offers to clients. The firm has added larger and more innovative pools of investments, and has access to a large selection of new issues, private placements and other alternative investments. Another big advantage is advanced finan-
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MENTORING AT NOUR PRIVATE WEALTH
cial planning software, which will allow NPW’s advisors to meet increasingly onerous KYC and suitability regulatory requirements. “We will also keep on focusing on financial planning as a core in our business,” Nour says. “Once a plan is in place, the enhanced system helps update and manage it. It ensures that we are on the right track and allows us to evaluate our work. “We have built the infrastructure that gives clients the ability to bundle up family members, parents, their children and, in some cases, their grandchildren under the same ‘family’ plan, which will translate to larger assets and a lower fee rate,” Nour adds. “We have given people the incentive to bring on family members who can benefit from a lower
fee. Family members can join the plan, even if they are not living at the same address or in the same province, as long as our advisor is licensed in the province where they reside.” Another significant benefit is the ability for NPW’s advisors to manage assets for nonresident clients (where securities regulations permit) and for clients to hold accounts and invest in 19 different currencies, including euros, pounds, yen and Swiss francs. That’s especially attractive, Nour says, for clients who hold a pension in one of those currencies. RRSP accounts and TFSAs can be held in Canadian and US dollars as well. Nour’s clients will also benefit from the increased transparency of the new online platform. “Clients will be able to see their
Elie Nour has worked with his senior advisors on a mentoring program that brings new associates into the firm, whether they’re straight from university, transitioning from another area of the financial services industry or starting a completely new career. The program was built on a sustained commitment to guiding new associates through the process of becoming successful advisors. A productive mentoring relationship depends on a good match, and NPW’s mentoring program carefully matches new associates’ competencies, backgrounds, education and needs with the right mentor. Once the match is made, the mentoring program provides the structure and guidance the associate needs to achieve their goals. Mentors guide the new associates to build their own business and contribute to all regular activities of an advisor, from financial planning to portfolio analysis. Once the associates become registered advisors, the client assets they accumulated with their mentor are gradually moved under their own code. From that point on, senior management takes over the supervision of the new advisor to make sure all company and regulatory rules are followed. performance, book costs, market value and all the details of their accounts online,” he says. “Trades are reported in real time, and all reports, including statements and tax slips, are available online. The platform is quite advanced, very user-friendly and will provide more transparency.
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SPECIAL PROMOTIONAL FEATURE
NOUR PRIVATE WEALTH
FAST FACTS: ELIE NOUR Graduated from McGill University in 2004 with degree in economics and minors in management and Hispanic studies Began his career in 2005 with Berkshire Securities Ranked as a top producer for Manulife Securities in 2011 and 2012 and became a branch manager in 2013 Has been named to the Wealth Professional Canada Top 50 Advisors list each year since 2014 Was nominated for Advisor of the Year at the 2017 and 2018 Wealth Professional Awards and won New Practice of the Year in 2015 Received Manulife Securities’ 2018 Ovation Award, the company’s most prestigious recognition of excellence Is a member of the Forbes Finance Council and the Avisory Council for the University of Toronto Faculty of Music
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“We try not to focus only on lowering fees; with the new technologies available to us, we are simplifying our business,” he continues. “Processing paperwork is now by far more advanced than most firms out there. We have introduced a system known as ECAP, which helps us process forms faster and more efficiently online. Clients also benefit from our new e-signature system, which saves on time and costs, reduces the printing of papers – which is also environmentally friendly – and facilitates the way the documents are stored. Opening an account takes minutes, compared with the traditional platforms that can take over a week to process.”
the real added value of their expertise and focus their conversation on overall wealth management, with an emphasis on tax and estate planning.” In the short term, Nour is focusing on getting things running smoothly. He plans to continue growing the NPW team next year and reports that he’s already had interest from many advisors. He also hopes to expand the firm’s registration to include a portfolio management operation, which will allow NPW to manage assets on a discretionary basis. He’s also eyeing a move into the US market with FINRA registration, which will allow NPW to take on clients south of the
“I believe we’re at a critical juncture in our profession’s history, where clients’ expectations are heightened and margins are under intense pressure. Our clients and advisors alike can now benefit from an advanced digitized experience” Elie Nour, Nour Private Wealth Looking ahead So why make the move to independence now? “I believe we’re at a critical juncture in our profession’s history, where clients’ expectations are heightened and margins are under intense pressure,” Nour says. “Our clients and advisors alike can now benefit from an advanced digitized experience that was not available on the old platform. We are also providing our advisors with the tools they need to run their practice more efficiently and help them keep their expenses down in a margincompressed world. With this new platform, our advisors can demonstrate to their clients
border and manage assets for existing clients who have dual citizenship. “I believe our firm will grow at a faster rate going forward as we keep on adjusting our business focus toward the growing influence of the millennial investor base, as well as the mass affluent segment and high-net worth investors,” Nour says. “We have the right technology applications to meet clients’ demands for improved operating efficiencies.” But for now, Nour is simply pleased to have achieved the milestone of launching an independent firm and is excited for its future prospects.
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FEATURE / BROKER EDUCATION FEATURES
INNOVATION
Creating a culture where innovation thrives What does it take to embed a culture of innovation in an organization? Amanda Imber examines the key drivers of innovation culture
DOES YOUR organization have a culture in which innovation thrives? Are people challenging the status quo and being encouraged by leaders to take risks in pursuit of innovation? Or is the opposite true – managers don’t take time to listen to new ideas, and suggestions to make improvements are met with the comment, “But we tried that last year and it didn’t work”? Building a culture of innovation is hard work. Many leaders who have been given this directive immediately think about the Googles and Apples of the world. Images of beanbags and table-tennis tables fill their minds, as do ‘blue sky’ workshops in far-off country retreats. However, what we know from research is that all of this is completely ineffective in creating a culture of innovation. As is often the case, the voice of popular culture and fad-ridden management books wins out over the voice of scientific research. Jargonfilled, densely written journal papers are harder to access than the pop-psych books filling the shelves. The scientific research into how to create a culture where innovation thrives is both plen-
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tiful and precise. For example, Samuel Hunter from the University of Oklahoma, along with his colleagues Katrina Bedell and Michael Mumford, ran a large-scale meta-analysis to understand which variables had the biggest impact on innovation culture. They reviewed 42 journal papers, which, in total, had drawn
lenge’ as the “perception that jobs and/or tasks are challenging, complex and interesting – yet at the same time, not overly taxing or unduly overwhelming.” It is important that you don’t simply think about how to give people the biggest possible challenge. Instead, you should ensure that the
It is not uncommon for senior leaders to play it safe when confronted with the choice of whether to support innovation data from 14,490 participants. The research revealed 14 key drivers into innovation culture and ranked the drivers from most impactful through to least impactful. Let’s delve further into three of the top-ranking variables. 1 Find the right level of challenge
Hunter’s meta-analysis found that employees feeling a strong sense of challenge in their work is one of the strongest drivers of a culture of innovation. They defined ‘chal-
level of challenge you set is one that is achievable. On the flip side, setting tasks that people are able to complete with their eyes closed will not breed a culture where innovation thrives. In a 2014 review of several meta-analyses, Silvia da Costa and several colleagues from the University of the Basque Country examined the difference in creativity for those in challenging versus non-challenging roles. The researchers found that if people are in a role that challenges them, 67% will demonstrate above-average creativity and innova-
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your company doesn’t just pay lip service to risk-taking, but actually does it. You might even want to consider having a company award for innovations that were not successes, but where the learnings were really rich. Finally, consider reframing risk-taking in a positive way, such as talking about how risks provide people with the opportunity to learn. 3 Support from the top
tion in their performance. In contrast, only 33% of people in ‘easy’ jobs show aboveaverage innovation. At GE, Jeff Immelt famously introduced imagination breakthroughs [IBs], defined as an innovation that will contribute $100 million worth of incremental growth, to his senior leadership team. Each member of the team was responsible for generating three IBs every year. The challenge is big, but the resources made available to leaders make it a challenge they can meet. Matching the level of challenge to an individual’s skill level is key to finding the optimal level. As a manager, take time to thoughtfully consider how you allocate tasks and projects to people. Ensure that you are matching these elements so that people feel a significant sense of challenge. 2 Encourage risk-taking
The notion of failure being unacceptable is one that I have found resonates with many organizations. Failure is generally thought of
as a dirty word, something that gets swept under the carpet when it does rear its ugly head. But being able to acknowledge and learn from failure is a huge part of building a culture where risk-taking is tolerated and innovation can thrive. Leaders play an important role in signalling that risk-taking is encouraged and that failure is tolerated. The Tata Group is an example of a company that has embraced risk-taking. Like many organizations serious about innovation, they have an annual innovation awards program, known as InnoVista. While that’s not particularly ground-breaking, what is innovative is the awards categories. InnoVista pays tribute to the group’s most outstanding and promising innovations, but there is also a category called Dare to Try, which was launched back in 2009. This category is reserved for ideas that were attempted but that, according to the Tata Group, ‘have fallen short of achieving optimum results.’ As a leader, think about initiatives and actions you can put in place to illustrate that
Ensuring that senior leaders in your organization understand and communicate the importance of innovation is critical. In fact, Hunter’s meta-analysis showed that people feeling that the top level of management truly supported innovation efforts was one of the strongest predictors of an innovation culture. Unfortunately, it is not uncommon for senior leaders to play it safe when confronted with the choice of whether to support innovation. I recently worked with the Australian leadership team of a global technology company. While innovation was a strategic priority for the company globally, the Australian CEO was frightened of innovation because it meant taking a risk. And this fear permeated the business, which meant that employees were too nervous to do anything differently because that was the message they were getting from the top. If you are a senior leader, make sure that you see your role as actually innovating, as opposed to just delegating it to other people. Research has shown this is a key differentiator between leaders in innovative versus non-innovative companies. Further, as a leader, think about behaviours you can engage in that symbolize your commitment to and support of innovation.
Dr Amantha Imber is the founder of Inventium, a leading innovation consultancy. Her latest book, The Innovation Formula, tackles the topic of how organizations can create a culture where innovation thrives.
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FEATURES
FLEXIBLE WORK
Is too much flexibility killing productivity? Are your employees taking a flexible work policy too far? Anna O’Dea offers some tips for getting productivity back without taking away a desirable benefit
IN TODAY’S digital world, employees expect the opportunity to work at times and in places that suit them. The days of being chained to a desk from nine to five are disappearing as companies embrace the digital tools that free their talent to work from anywhere at any time, yet still stay connected.
cracks are showing. Some leaders are worried that productivity is taking a hit and team culture is dying, as people aren’t as present in the office. They know some employees are taking too many liberties, but they don’t want to snatch back the benefit. If this sounds familiar, it might be time to
When setting boundaries, look at your own behaviour first. Are you being responsive when off-site, taking interest in your staff so they feel energized? Strategy planning in a cute café, a conference call in transit to save time, skipping train delays to sort spreadsheets from the couch – the appeal is obvious. The employers I talk to at Agency Iceberg know that offering freedom is a competitive way to attract and retain great people. But
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tighten up flexibility in your business. Here are some questions to consider.
Are my employees taking advantage? If you’ve hired well, you should have committed people. But talent of all
tenures, generations and personal situations can lose focus when you loosen structure. Watch for signs such as missing meetings, being difficult to reach online or via mobile within agreed hours, not hitting targets, or failing to meet deadlines. Keep an eye on increasing requests for flex-time favours that don’t suit your business. Too many Friday afternoons off, despite the promise of making up time on the weekend, is unlikely to suit clientfacing roles.
How much flexibility suits what we do? Think about the type of work that must be done, and when and where it’s best performed. Consider the ideal situations for teamwork, client meetings and mentoring. What’s the right mix of in-person or online interactions for each – for example, daily in-person WIPs, weekly face-to-face strategy sessions or continual dialogue online?
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Should flexibility be earned? If you give freedom to one part of the business, you should give it to all, with awareness of what’s appropriate for each role. But for new hires, it could help to set a probation phase. You can understand their working style, build trust and ensure they know what’s expected.
How can I get some discipline back? When setting boundaries, look at your own behaviour first. Are you being responsive when off-site, taking interest in your staff so they feel energized? Then ask your team how they view the situation, as they could be struggling to adjust to digital life, and you can think about how to better manage the change. Easy ways to get structure back include
booking regular in-person meetings and agreeing on hours employees must be available to clients and colleagues. Set expectations for response times, regardless of where the employee will be working from.
How can technology help? You can keep everyone in easy reach by supplying quick messaging tools (such as Skype for Business, Slack or Google Chat) and video conferencing capabilities. Project management cloud platforms such as Toggl are great for time tracking, and workflow dashboards such as Trello help you see what everyone’s up to on projects.
How can culture help? You want people to be self-motivated and happy to come into the office,
and to stay focused on their work when off-site. Culture can play a big part in getting momentum back. Set up workshops to share insights, challenges and encouragement. And there’s nothing wrong with team lunches and Friday celebrations to bring back the spark! Flex is the future – but within reason. Digital freedom is here, and everyone wants to embrace the benefits. Considering these questions should help you offer flexibility while keeping productivity high and a great company culture alive. A recruitment expert and the founder and director of Agency Iceberg, Anna O’Dea has placed thousands of employees in the best workplaces. O’Dea is also the founder of #LeadingLadies, an award-winning interview series featuring C-suite professionals’ career journeys.
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NOVEMBER 21, 2018 | BEANFIELD CENTRE | TORONTO
Join us at Canada’s premier event for women in wealth management - a one day event addressing key challenges in the Canadian wealth management space
Tea Nicola
Fotini Iconomopoulos
Julia Chung
Christine Fortin
Chief Executive Officer & Co-Founder WealthBar
Negotiation Consultant Forward Focusing
Co-Founder & Sr. Financial Planner Spring Financial Planning
Vice-President, Senior Wealth Advisor and Financial Planner BMO Nesbitt Burns
WHO SHOULD ATTEND?
WHAT WILL YOU LEARN?
Women advisors and wealth professionals in the wealth management industry who want to advance and grow their careers
Practical strategies for women advisors and entrepreneurs who are looking to grow their businesses
Successful advisors, entrepreneurs and senior business executives in the industry who’ve made names for themselves Firms, networks, practices and financial services companies who want to hire more women (HR people and senior executives)
Learn from the most successful women in the industry and have a chance to network with them in person Get practical strategies for overcoming the barriers facing women in the industry Best practices for companies who want to attract and hire more women including how companies can support, coach and help women succeed in the industry
Register today at women.wealthprofessional.ca or call 416-644-8740 ext 243
#WPWomenInWealth WealthProCA
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PEOPLE
CAREER PATH
AHEAD OF THE CURVE
Be it in fashion or finance, Rebecca Horwood has always had a talent for spotting – and making the most of – trends Horwood was admitted to Ryerson University to study fashion design – which included learning how to run a shop – but she ultimately switched to business “The principal said I was the best dressed in school – I’m a trendsetter – but I wasn’t the best designer. I was good in sales. I had the business mindset; I was a heck of a lot more interested in making a profit than in fashion”
1973 SETS THE TRENDS
1980
BECOMES AN ADVISOR After independently taking the Canadian Securities Course, Horwood was pointed toward Richardson Greenshields “[A friend] told me there were four empty seats at the Bay Street branch – they hired me on the spot. I was the first woman investment advisor at that branch, and I set records straight away. I had no fear of the cold call to bring in clients, and I understood how to build a niche”
1987 EMBRACES FAMILY Pregnant with her first child, Horwood changed her motto, ‘the power of one,’ to ‘the power of team’ when she invited her husband, John (a chartered accountant), to join her at Richardson “We went from the top 5% in Canada to number one in about four years. I said to John, ‘This is the future’ – I was running a family office and didn’t even know it. I was ahead of the trend”
2018 WINS THE AWARD OF A LIFETIME Horwood considers the Lifetime Achievement Award she won at this year’s Wealth Professional Awards to be the perfect cap to her career – and to top off the night, she won a second award for being the best dressed at the ceremony “Being selected from all those nominations to receive the award – that was the highest accomplishment. It meant a lot to be acknowledged for all I’ve done in the industry. It felt like getting an Academy Award – it was phenomenal”
1978
FINDS A ROLE MODEL Advised by her father to put her sales skills to work in either life insurance or real estate, Horwood became the second woman ever hired at Canada Life’s Toronto branch, where she set records and made a key connection “I was ‘womanning’ the booth at an event and met a woman from Merrill Lynch and became friends with her – I looked at her and thought, ‘That’s what I want to do’”
1984
REIGNS OVER MUTUAL FUNDS With a new focus on mutual funds, Horwood began building her clientele by offering seminars on the investment vehicle, which were later used by Richardson as the model for its corporate seminars
“I started to see the value of mutual funds – they called me ‘the queen of mutual funds.’ The seminars were really trailblazing; hardly anybody was doing them” 1996
BUYS HER DREAM HOME When RBC took over Richardson, the resultant windfall allowed Horwood to purchase her dream home. Perched on a ravine in Etobicoke, it’s close to where her parents grew up and the apartment her grandparents lived in – in fact, as a teenager, Horwood saw the houses being built from the balcony of her grandparents’ apartment “I always had a dream of owning one of these houses on the ravine”
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PEOPLE
OTHER LIFE
TELL US ABOUT YOUR OTHER LIFE Email wealthprofessional@kmimedia.ca
De Thomasis devoted himself to coaching by “devouring as much information as I could – videos, books, magazines. I educated myself on being a coach”
HAVING A BALL Outside of the office, Tony De Thomasis delights in doling out advice to young soccer players TONY DE THOMASIS might have taken on the responsibility of coaching his son’s soccer team because of the lack of qualified alternatives, but the Ontario-based advisor and president of De Thomas Wealth Management says it didn’t take long for him to “get hooked.” “Kids up to 10 years old are like sponges,” he says. “They are so eager to learn, and the
16–28
Age range of players on De Thomasis’ ‘open’ soccer team
64
200
Estimated number of kids De Thomasis has coached
more they learn, the more you want to teach them – and marvel at how well they are playing the game.” Prior to becoming an advisor, De Thomasis toyed with the idea of becoming a teacher, and a commitment to learning is reflected in his coaching style. “Winning can become a bit of an addiction, and it shouldn’t be,” he says. “As a coach, I want to face good
teams that can beat us so that I can fix any flaws. If you’re winning, you don’t improve because you never identify any weaknesses.” These days, De Thomasis’ original players are grown and have children of their own, but they haven’t forgotten the man who coached their soccer team all those years ago – De Thomasis has been invited to the weddings of several former players.
4
Practices De Thomasis coaches per week (plus a weekend game)
www.wealthprofessional.ca
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Global Real Estate & E-Commerce DIVIDEND FUND
EXCHANGE OFFER AND CASH OPTION Deadline: Prior to 5:00 p.m. (Toronto time) on September 20, 2018. CDS participants may have earlier deadlines. IF YOU OWN SECURITIES OF ANY OF THE FOLLOWING ISSUERS, YOU ARE INVITED TO EXCHANGE THOSE SECURITIES FOR UNITS OF GLOBAL REAL ESTATE & E-COMMERCE DIVIDEND FUND Global Real Estate & E-Commerce Dividend Fund (the “Fund”) is offering units of the Fund to investors at a price of $10.00 per unit in exchange for the securities of any of the issuers listed here or for cash subscriptions. Prospective purchasers under the exchange option are required to deposit their exchange eligible securities prior to 5:00 p.m. (Toronto time) on September 20, 2018, in the manner described in the preliminary prospectus of the Fund dated August 24, 2018.
The Fund’s investment objectives are to provide holders of units with: (i) stable monthly cash distributions, and (ii) enhanced long-term total return through capital appreciation of the Fund’s investment portfolio through a diversified, actively managed portfolio comprised of dividend-paying securities of global real estate issuers that the advisor believes are well-positioned to benefit from the rapid adoption of e-commerce products and services, as well as securities of issuers operating in or deriving a significant portion of their revenue or earnings from products or services related to the e-commerce industry. The initial target distribution yield for the Fund is 5% per annum based on the original subscription price (or $0.04167 per unit per month or $0.50 per unit per annum). Middlefield Capital Corporation, the advisor, will provide investment management advice to the Fund.
REAL ESTATE ISSUERS
Agellan Commercial REIT Allied Properties REIT American Hotel Income Properties REIT LP American Tower Corp Artis REIT BMO Equal Weight REITs Index ETF Boardwalk REIT Canadian Apartment Properties REIT Chartwell Retirement Residences Cominar REIT Crombie REIT Crown Castle International Corp Dream Global REIT Dream Industrial REIT Dream Office REIT Duke Realty Corp Equinix Inc Extendicare Inc First Capital Realty Inc Granite REIT
E-COMMERCE RELATED ISSUERS Alibaba Group Holding Ltd Alphabet Inc. Amazon.com Inc AT&T Inc BCE Inc Capgemini SE CenturyLink Inc CGI Group Inc Cisco Systems Inc Descartes Systems Group Inc/The Deutsche Post AG FedEx Corp International Business Machines Corp Macy’s Inc Marks & Spencer Group PLC
ACR.UN AP.UN HOT.UN AMT AX.UN ZRE BEI.UN CAR.UN CSH.UN CUF.UN CRR.UN CCI DRG.UN DIR.UN D.UN DRE EQIX EXE FCR GRT.UN
H&R REIT InterRent REIT Invesco S&P/TSX REIT Income Index ETF iShares Global Real Estate Index ETF iShares S&P/TSX Capped REIT Index ETF Killam Apartment REIT Northview Apartment REIT NorthWest Healthcare Properties REIT Prologis Inc Purpose Duration Hedged Real Estate Fund RBC Quant Global Real Estate Leaders ETF RioCan REIT Segro PLC SmartCentres REIT STAG Industrial Inc. Summit Industrial Income REIT Terreno Realty Corp Vanguard FTSE Canadian Capped REIT Index ETF VEREIT Inc. WPT Industrial REIT
BABA GOOG AMZN T (NYSE) BCE CGEMY CTL GIB/A CSCO DSG DPSGY FDX IBM M MAKSY
Microsoft Corp Ocado Group PLC PayPal Holdings Inc QUALCOMM Inc salesforce.com Inc SAP SE Shopify Inc Taiwan Semiconductor Manufacturing Co Ltd TELUS Corp Tencent Holdings Ltd United Parcel Service Inc Visa Inc Walmart Inc Western Union Co/The WPP PLC XPO Logistics Inc
OTHER ISSUERS AltaGas Ltd ARC Resources Ltd Bank of Montreal Bank of Nova Scotia/The Barrick Gold Corp Bonavista Energy Corp Canadian Imperial Bank of Commerce CI Financial Corp Crescent Point Energy Corp Emera Inc Enbridge Inc Encana Corp Enerplus Corp Freehold Royalties Ltd
ALA ARX BMO BNS ABX BNP CM CIX CPG EMA ENB ECA ERF FRU
General Electric Co Great-West Lifeco Inc Hudbay Minerals Inc Hydro One Ltd Inter Pipeline Ltd Laurentian Bank of Canada Manulife Financial Corp National Bank of Canada Power Financial Corp Royal Bank of Canada SNC-Lavalin Group Inc Sun Life Financial Inc Suncor Energy Inc Toronto-Dominion Bank/The TransAlta Corp
HR.UN IIP.UN REIT CGR XRE KMP.UN NVU.UN NWH.UN PLD PHR RGRE REI.UN SEGXF SRU.UN STAG SMU.UN TRNO VRE VER WIR/U MSFT OCDDY PYPL QCOM CRM SAP SHOP TSM T(TSX) TCEHY UPS V WMT WU WPP XPO GE GWO HBM H IPL LB MFC NA PWF RY SNC SLF SU TD TA
ADVISOR
(L to R) JEREMY BRASSEUR, Managing Director, Corporate Finance, DEAN ORRICO, President and Chief Investment Officer and ROB LAUZON, Managing Director and Deputy Chief Investment Officer
To learn more about Global Real Estate & E-Commerce Dividend Fund, speak with your financial advisor or contact us at: 1-888-890-1868 invest@middlefield.com www.middlefield.com
Middlefield Limited 812 Memorial Drive NW Calgary, Alberta T2N 3C8
First Canadian Place 58th Floor, P.O. Box 192 Toronto, Ontario M5X 1A6
A preliminary prospectus containing important information relating to these securities has been filed with securities commissions or similar authorities in each of the provinces of Canada. The preliminary prospectus is still subject to completion or amendment. Copies of the preliminary prospectus may be obtained from any of the syndicate of agents using the contact information for such agent. There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the final prospectus has been issued.
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THE FIRST OF ITS KIND IN CANADA
ALTERNATIVE STRATEGIES. FOR BETTER OUTCOMES. Introducing the Mackenzie Multi-Strategy Absolute Return Fund – the first mutual fund in Canada to use alternative investment strategies based on the proposed alternative funds framework by Canadian regulators. Now you have more alternatives: • More sources of investment returns • More ways to improve diversification • More tools to manage risk Regulatory relief was given for the Mackenzie Multi-Strategy Absolute Return Fund from certain investment restrictions. The Fund is only available for sale through IIROC advisors.
Talk to your Mackenzie Sales Representative today.
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Commissions, trailing commissions, management fees, brokerage fees and expenses all may be associated with investment funds. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. 206735-Q2-Outcomes-Campaign-Alts-8.25x10.875-en.indd 4 00_OBC.indd 1
2018-05-25 4:58 PM 21/09/2018 8:29:25 AM