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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 quanti- tative 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 in- vestment philosophy at the foundation of its products. 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 prod- uct 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
tise 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 management 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 tech- nology funds.
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
here at TDAM actively
helped design a unique
MSCI World
■ Dividend ■ Call Premium
TGED
■ Put Premium
Target Put Income Yield
Target Call Income Yield
Current MSCI World
Income Yield
SPECIAL SPONSORED CONTENT
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.
Objective:
Enhance
income, without sacrificing total return
■ 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 provider. This exper-
“It might also come from actively designing a bespoke or customized index. For example, our product and portfolio management team
Invest in today’s largest and fastest growing tech companies
There’s no need to choose between recognizable technology names and emerging companies that are
at the forefront of innovation. The TD Global Technology Leaders Index ETF (TEC) provides access to the companies striving to reshape the technology landscape, as well as some of today’s largest technology names.
EXPOSURE TO MULTIPLE THEMES THAT ARE DRIVING INNOVATION
Core technology exposure (i.e., FAANG)
+
=
[technology] index...”
—Trevor Cummings, CIMA, ETF Specialist, TD Asset Management
■ Actively managed ETFs seem to resonate with Canadians. Why is the demand for actively managed ETFs in Canada disproportionately higher than in other major markets?
Fuhr: If you look at Canada, about 22% of ETF assets are in actively managed solutions. Globally, the number is 2.8%.2 That’s a very big difference, and part of that comes down to how ETFs are regulated. In Canada, ETFs are regulat- ed just like mutual funds. So, advisors and clients appear to have the confi- dence and flexibility to execute their strategies using both ETFs and mutual funds together. I think Canadians often look at ETFs to play a similar role to that of mutual funds, and sometimes passive indices alone don’t always re- flect what investors actually want and need to invest in to achieve their goals.
On top of Canada being the first to launch an ETF, there’s also been a
lot of innovation in ETFs in Canada. It’s often not about the “wrapper” of the ETF structure, it’s about the strategy inside of it, and how investors use it. And I think
Canadian ETF providers have been successful at expanding the boundaries and evolving to develop tools that advisors and investors can use.
■ How can ETFs help enhance advisors’ practices amid the massive intergenerational wealth transfer occurring in Canada?
Cummings: One of the industry’s tailwinds is that younger investors seem very receptive to ETFs and technological innovation in the financial sector. Younger investors are not only asking their prospective service providers about ETFs, they expect their advisor to be proficient with them – it’s becoming one of those import- ant boxes these investors want to see checked off. They may be needing advisors who can help them navigate the vast array of ETF solutions, in a forward-looking way.
Intergenerational wealth transfer represents both a great opportunity and great risk to an advisor’s practice. So, it’s important to engage this next generation. ETFs can serve as a tool to do that. Here at TDAM, we are equipped to help advisors deliver key educational engagement to prospects, existing clients and the families of existing clients.
AI & VR
Fintech/ Blockchain
Emerging Technology Themes
Big Data/Cloud Computing
E-commerce
Social/Internet Media
TD Global Technology Leaders Index ETF Core Exposure
Scientific Equipment
Other themes
INCOME YIELD