ETF industry refusing to mellow with age

Having turned 25 last year, you might have expected ETFs to settle down a little — mature, as it were. Gauging from the recent heightened level of activity, however, you would have been off the mark. Here is a roundup of recent developments in the Canadian ETF space:

BACK TO THE FUTURE WITH TD

TD Asset Management launched 6 ETFs recently as they rejoined the ETF issuers ranks after a 10- year absence. I call it “back to the future” because to start, TD has opted to go with “vanilla” core beta/ broad benchmark exposure, such as the S&P500 and the S& P/ TSX Composite Index. Actively managed ETFs are also on the horizon for TD.

MORE DIVIDEND SMART BETA

Sphere Investments has become the latest purveyor of smart beta. Two themes stand out from discussions with them: One, they believe that dividends will remain a significant ingredient; and two, they want to encourage Canadians to invest globally, hence management fees have been kept at the same level across their offerings.

BLURRED LINES

Mutual Fund c ompany Mackenzie launched 4 act- ively managed fixed income ETFs this week. Active is — in my mind — clearly the operative word here. To extrapolate the “value” attached to this active management, take broad bond ETFs of the passive kind, and subtract their fees from those of corresponding active ETFs. That way, you will have obtained a “proxy” number as to the value that Mackenzie puts on their active services.

EXTENDING THEIR REACH

Horizons followed its recent China Dividend ETF with the launch of a Canadian High Dividend yield ETF, a NASDAQ100 ETF, and will soon list a EURO Stoxx 50 ( TR) ETF. For Horizons, the focus is on tracking, costs and tax efficiency.

MORE AND MORE SOLUTIONS

iShares rounded out its factors offering and also rebranded them. Core: check; Factors: check; Satellite: check. The only thing missing is active management — could, or should an ETF strategist be considered here in the near future?

GETTING ‘ TECHNICAL’

Invesco Power shares launched the PowerShares DWA Global Momentum Index ETF ( DWG), which became in the process the first listing on Aequitas’ NEO Exchange, which, in a little over a year of existence, is already apparently making significant market share inroads in terms of ETF trading in Canada. Given the success of BMO ETFs in offering access to an ETF strategist focused on technical analysis, it will be interesting to see if investors embrace what is — in the U. S. — a recognized brand amongst “technical analysis” aficionados.

GLOBALLY ACTIVE

Hamilton Capital launched an actively managed Global Banks ETF, to be followed by a Global Financials Yield ETF.

SMART GLOBAL

Vanguard filed to join the ranks of smart beta manufacturers with a globally-oriented offering featuring management fees likely to alter the smart beta pricing landscape in Canada going forward.

All this adds up to three themes for 2016: Convergence, as more players enter the fray; competition, which is intensifying across the board; and confusion, as investors and advisers confront growing ranks of providers and overlapping product offerings. Whose beta should I choose? Why this provider’s beta ETF rather than that of its direct competitor? Hedged or unhedged? “Stop, already,” you might say, “My head hurts!” That, I’m afraid, isn’t likely to happen. Rather than lament a pace that looks to be picking up, embrace its merits: more solutions, more choices, and greater cost effectiveness.