BlackRock and Dynamic Funds launch active ETF series in Canada

The Canadian subsidiary of BlackRock has partnered with Toronto investment firm Dynamic Funds to launch a new suite of five actively managed exchangetraded funds, breaking new ground in Canada for the world’s largest asset manager.

BlackRock Canada and Dynamic saw their Dynamic iShares Active ETFs debut on the Toronto Stock Exchange Wednesday, with a total seed value of $20 million.

The sectors covered by the active ETFs are Canadian Dividend, U.S. Dividend, Global Dividend, Preferred Shares and Crossover Bonds (those on the line between investment grade and highyield).

“Our clients have been asking how they can get more diverse exposure through the ETF product structure,” said Warren Collier, head of iShares at BlackRock Canada, in an interview. “Many of them want to be able to actively implement their allocation through index ETFs and also deliver select active exposure through the ETF structure as well.”

Active investing, as opposed to indexing to a portfolio such as the Dow Jones Industrial Average or the S&P 500, attempts to outperform the markets and is usually pegged to higher performance benchmarks.

“BlackRock isn’t delivering those active strategies in Canada, so we looked for a well-respected active manager to partner with and the team at Dynamic seemed like the best fit for us,” added Collier.

Jordy Chilcott, president and CEO of Dynamic Funds, said ETFs in Canada have been historically focused on indexes, where a vast majority of the industry’s assets reside today.

“There’s been more of a burgeoning industry around smart BETA (ETFs that use alternative index rules, as opposed to being cap weighted) and quant strategies,” he added, in an interview. “We believe this partnership takes that a little bit further: a truly active manager where the portfolio manager has their disciplined investment process, but most often is not going to look like their benchmark or the index.”

According to the Canadian Exchange Fund Association, the total value of assets in the Canadian ETF industry rose 26.8 per cent in 2016 to $113.7 billion, up from $89.6 billion at the end of 2015.

With headquarters in New York City, BlackRock Inc. was founded as a risk management and fixed-income firm in 1988, and has since grown to become the largest asset manager in the world with over US$5.1 trillion. In May, the company hired Canada Pension Plan Investment Board head Mark Wiseman to run its US$275-billion equities business.