Canadian asset manager CI Investments has launched a suite of actively managed ETFs on Toronto Stock Exchange providing exposure to liquid alternative investment strategies.
Kurt MacAlpine, CEO of CI Financial.
Liquid alternatives refer to non-traditional investments such as hedge fund strategies that have historically only been available to certain institutional investors but are now more widely accessible due to the use of a ‘liquid’ vehicle such as an ETF.
The suite currently consists of three ETFs that mirror the strategies of CI’s liquid alternative mutual funds launched in November 2018.
The ETFs
The CI Lawrence Park Alternative Investment Grade Credit ETF seeks to generate consistent positive total returns with an emphasis on capital preservation and low correlation to traditional equity and fixed income markets.
It will be primarily invested in the investment-grade debt of corporations and financial institutions in the developed world. The ETF may engage in short-selling up to 50% of the portfolio’s NAV and may use derivatives to leverage up to 300% of the portfolio’s NAV. Foreign currency exposure relative to the Canadian dollar will be hedged.
The fund is listed under the ticker CRED CN and is also available in a US dollar-denominated share class (CRED.U CN). It comes with a management fee of 0.80% and a 10% performance fee based on the outperformance of the fund’s NAV relative to its high water mark plus a hurdle rate (the return on the FTSE Canada All Corporate Bond Index).
The CI Marret Alternative Absolute Return Bond ETF seeks to provide positive absolute returns with low volatility over a market cycle regardless of market conditions or general market direction.
It does this by primarily investing in debt instruments across the credit spectrum including cash, government debt, investment-grade corporate debt, high-yield debt, credit derivatives and other income-producing securities throughout the world. The ETF may also engage in short-selling up to 50% of the portfolio’s NAV and may use derivatives to leverage up to 300% of the portfolio’s NAV.
The fund is listed under the ticker CMAR CN and is also available in a US dollar-denominated share class (CMAR.U CN). It also comes with a management fee of 0.80% and a 10% performance fee based on the outperformance of the fund’s NAV relative to its high water mark plus a hurdle rate (the ten-year Canadian government bond yield plus 1.00%).
The CI Munro Alternative Global Growth ETF seeks to generate risk-adjusted, absolute returns through exposure to global growth equities over the medium to long term while maintaining a capital preservation mindset.
It does this by investing in a portfolio of 30-50 international equities, deploying a long/short equities strategy with a long bias. The strategy is designed to identify sustainable growth trends that are underappreciated and mispriced by the market. Leverage up to 300% of the portfolio’s NAV may be used.
The fund is listed under the ticker CMAG CN and comes with a management fee of 0.90% and a 15% performance fee based on the outperformance of the fund’s NAV relative to its high water mark plus a hurdle rate (the ten-year Canadian government bond yield plus 3.50%).
Kurt MacAlpine, Chief Executive Officer of CI Financial, commented, “Our liquid alternatives are sophisticated and innovative strategies that offer distinct benefits for investor portfolios, including the potential for enhanced returns, capital preservation, and reduced correlation to traditional asset classes. In launching these ETFs, we are making these unique mandates and our investment management expertise available to a wider range of investors who can choose the investment structure they prefer.”
In November 2019, CI Financial announced a new strategic direction in which the firm is focusing on modernizing its asset management business by scaling up its ETF division.
The firm first entered the ETF space in November 2015 when it acquired First Asset’s ETF line-up and has recently agreed to acquire WisdomTree Asset Management Canada, the Canadian ETF business of WisdomTree Investments, in a deal that is expected to close in the first quarter of 2020.
CI Investments has also expanded its ETF capabilities by launching its own ETFs. In addition to the liquid alternatives ETFs, the firm has recently introduced a high-interest savings ETF as well as its first fund to directly consider environmental, social, and governance (ESG) characteristics.