AGF launches liquid alternative ETFs on TSX

Oct 8th, 2019 | By | Category: Alternatives / Multi-Asset

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Canadian asset manager AGF Investments has launched two liquid alternative ETFs on Toronto Stock Exchange.

Florence Narine, Senior Vice-President, Head of Product, AGF.

Florence Narine, Senior Vice-President, Head of Product, AGF.

Leveraging the firm’s quantitative and factor-based investment platform – AGFiQ – the index-linked ETFs target opportunities in the US equity market, providing exposure to a market-neutral beta-focused strategy and a long/short portfolio focused on income.

The two funds are the AGFiQ US Market Neutral Anti-Beta CAD-Hedged ETF (QBTL CN) and the AGFiQ US Long/Short Dividend Income CAD-Hedged ETF (QUDV CN).

Each fund comes with an expense ratio of 0.55% and hedges currency exposure between the US dollar and the Canadian dollar.

Florence Narine, Senior Vice-President and Head of Product at AGF Investments, commented, “We believe alternative investments are fundamental building blocks for well-constructed portfolios, helping investors diversify their sources of risk and returns, contributing to lower volatility and opportunities for better long-term risk-adjusted returns.

“These offerings build on AGF’s long history of managing long/short, market-neutral, and derivative-based strategies in liquid investment vehicles in the US.”

Bill DeRoche, Chief Investment Officer, AGF Investments, added, “After a decade of strong equity market returns, investors are seeking tools for diversification and non-correlated returns to cushion against anticipated market volatility. However, in the current market environment, traditional diversifiers like fixed income are unlikely to provide the returns and yield investors need to achieve their goals.”

Market-neutral

The AGFiQ US Market Neutral Anti-Beta CAD-Hedged ETF tracks the Dow Jones US Thematic Market Neutral Anti-Beta Index.

The index, created by S&P Dow Jones Indices, selects its constituents from a universe of the 1,000 largest securities listed in the US, including real estate investment trusts (REITs).

The methodology starts by assigning all securities in the parent universe to ten sectors and ranking them by their market betas. Within each sector, approximately the 20% of securities with the lowest beta are then selected to form the long portion of the index, and approximately the 20% of securities with the highest beta are selected to form the short leg, thereby providing exposure to the spread return between low and high beta stocks.

As of each quarterly reconstitution and rebalance, the index is equally weighted while maintaining sector neutrality – the actual number of long and short positions in each sector is adjusted so that the weight of each sector reflects that of the parent universe.

Long/short dividend income

The AGFiQ US Long/Short Dividend Income CAD-Hedged ETF tracks the Indxx Hedged Dividend Income Currency-Hedged CAD Index.

Created by New York-headquartered Indxx, the index selects its constituents from a similar universe of the 1,000 largest US-listed securities including REITs and MLPs.

The methodology selects 100 high dividend securities to form the long portion of the index and between 150 and 200 securities with low or no dividend yield to form the short leg.

As of the quarterly reconstitution and rebalance, securities are equally weighted within the long and short legs with the index’s long exposure set at twice that of the short leg. The methodology adjusts the number of securities chosen for the short leg to achieve sector neutrality relative to the parent universe.

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