Evolve Funds has launched the actively managed Evolve Active Global Fixed Income ETF (EARN CN) on Toronto Stock Exchange.
Evolve ETFs ringing opening bell at the Toronto Stock Exchange on 15 November 2018.
The fund is managed by global investment giant Allianz Global Investors.
It seeks to generate positive long-term returns in excess of the 3 month US dollar Libor across all cycles – economic and interest rate – by investing primarily in debt securities of corporate issuers globally.
As well as investing in corproate bonds, the fund may also allocate to government bonds, money market instruments, mortgage- and asset-backed securities, public-sector bonds, floating-rate notes, coco bonds, and convertible debt securities.
Up to 25% of the portfolio may be invested in high-yield instruments, provided that no more than 10% of assets may be invested in debt securities with a rating of CCC+ or lower or unrated debt securities.
The fund’s managers initial take a top-down view on asset allocation before undertaking a bottom-up security selection approach.
The fund currently has 51 holdings. More than two-thirds (70.5%) of which are dedicated to bonds from US issuers with the next largest country exposures being Canada (7.3%), Japan (7.2%), and the UK (5.0%). Bonds are primarily sourced from issuers operating in the financials (32%) and industrial (30%) sectors.
The fund offers an indicative yield of 3.8% and has an average duration of 1.9 years.
“We are excited to partner with Evolve ETFs in sub-advising our first actively managed ETF and strengthening our foothold in Canada – a key growth market with fantastic opportunity,” said David Newman, Head of Global High Yield at Allianz Global Investors. “As a tenured active fixed income investor, we are well-positioned to navigate rising rates and market volatility in an ever-changing market environment.”
“Advisor and investor demand for actively managed fixed income ETFs continues to increase,” said Raj Lala, President & CEO of Evolve ETFs. “Over the past five years, the majority of active bond managers have outperformed passive mutual funds and ETFs. Active management in fixed income allows managers to position their portfolios appropriately to take advantage of market trends. We are very pleased to provide Canadian investors with access to the fixed income expertise of Allianz Global Investors, one of the world’s leading active investment managers.”
EARN comes with a management fee of 0.65%. Distributions are sent to investors on a monthly basis.
Unlike most other ETF markets where passive exposures by far dominate active in terms of assets under management, actively managed ETFs account for around 24% of total AUM held in fixed-income ETFs listed in Canada.
Fixed income also represents one of the fastest growing ETF segments in the country both in terms of number of products as well as assets.