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“If you look at Canada,
% of Active ETFs in Canada
Last 10 Years 25%
20% 15% 10% 5% 0%
Canadian Active vs. Passive ETF Flows 2009 vs. 2019
■ Active ■ Passive
about 22% of ETF assets are
in actively managed solutions.
Globally, the number is 2.8%.2
100%
That’s a very big difference,
80%
and part of that comes down
60%
40%
20%
0%
Cummings: We’ve seen the ETF market expand over the past decade. It moved from being mainly passive solutions to more specialized exposures, and then to quantitative and factor-based ETFs. Now, active strategies are an established segment of the market as well. While TDAM offers solutions in all four categories of products, we’re seeing increasing interest in quantitative and active ETF solutions. When you consider TDAM’s legacy of trust in fixed income and equity investments, the main difference now is we’re offering the same quality and diversity of solutions in an ETF vehicle.
■ How does this legacy of expertise translate into the ETF space?
Gossack: At TDAM, we have a wealth of expertise across many product lines. For any ETF provider, a solid offering starts with the company’s investment philosophy at the foundation of its products.
–Deborah A. Fuhr, MBA,
Managing Partner, Founder, ETFGI s
We weren’t the first to come to market with an income generating ETF product, but we noticed there could be ways to improve the approach. We saw that there were product paradigms that had to be broken. With our active management philosophy, we were able to add new elements and new ways to solve client problems that weren’t being addressed in the market.
TD Active Global Enhanced Dividend ETF (TGED) came out of us talking to advisors and clients. There was a need for a truly actively managed global product. While it was easier for advisors to access the Canadian and U.S. markets, our global expertise was what we could bring to the table. We developed an actively managed ETF starting with a core group of quality companies, and then added
a truly active options overlay to help enhance income. We did all this to help generate income while keeping total returns in mind, changing the product paradigm and giving advisors and investors solutions the market wasn’t providing.
“We developed an actively managed ETF starting with
a core group of quality companies, and then added a truly active options overlay to help enhance income ... changing the product paradigm and giving advisors and investors solutions the market wasn’t providing.”
–Ben Gossack, CFA, MBA, Portfolio Manager, TD Asset Managment
provider. This expertise might come in the form of a sophisticated options overlay on top of a high-conviction global equity portfolio, for instance. It might also come from actively designing a bespoke or customized index. For example, our product and portfolio man- agement team here at TDAM actively helped design a unique index with index company Solactive to help fill a technology-stock gap in the market. In doing so, we now offer TD Global Technology Leaders Index ETF (TEC), which tracks a unique index currently exclusive
to TD. TEC is an ETF that offers exposure to traditional technology companies, as well as new emerging companies not traditionally captured in other technology funds.
to how ETFs are regulated.”
Enhanced Yield in Global Investing
TD Active Global Enhanced Dividend ETF (TGED)
What is an Enhanced Dividend?
Using an Active Options Overlay Strategy to Help Deliver Income on Top of the Dividends
Target Put Income Yield
Target Call Income Yield
Current MSCI World
Income Yield
Objective:
Enhance
income, without sacrificing total return
MSCI World
■ Dividend ■ Call Premium
TGED
■ Put Premium
Source: TD Asset Management, Bloomberg Finance L.P.
Note: Call and Put income yields for illustration purposes only. The visual is used to help illustrate our objective. Our objective is to add income via options. Positive performance is not guaranteed.
■ Are the lines between passive and active ETFs starting to blur?
Cummings: I would submit that every investment decision is active. If you think about it, any asset allocation is an active choice. How much equity, for instance? Or how much fixed income versus cash? These are all active choices. As are any tilts or overweight positions in a portfolio to fit a client’s unique circumstances. Even the choice of which passive index to use is an active choice, because there are multiple index providers for certain given asset classes.
Some of these active choices may be fairly straightforward. But others may require relying on the specialized expertise of an ETF
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