Toronto-headquartered Guardian Capital has unveiled its first ETFs – a suite of actively managed strategies listed on the Toronto Stock Exchange.
Toronto-based asset manager Guardian Capital has unveiled its inaugural suite of ETFs, on TSX. (file image)
The suite includes five ETFs, comprising a pair of fundamental bottom-up strategies and a trio of quantitative strategies that draw on insights from artificial intelligence.
The bottom-up strategies are part of the C$27.5 billion asset manager’s ‘Directed Outcomes’ product line which combine high conviction ideas with derivative overlays to achieve high income and risk mitigation.
The quantitative strategies are part of its ‘i3’ product line which fuse artificial intelligence with human intelligence and innovation in a bid to deliver superior risk-adjusted returns.
In line with the firm’s house investment style, the portfolios are all relatively concentrated, focused on a modest number of “best idea” stocks. Guardian subscribes to the view that the benefits of diversification in reducing stock-specific risks to a portfolio are pretty much maximized once a portfolio holds as few as 20 securities – additions above that threshold play only a marginal role in risk reduction.
Barry Gordon, Managing Director and Head of Canadian Retail Asset Management at Guardian Capital, said, “Guardian Capital’s entry into the ETF marketplace aligns with our innovative approach to investment solutions. The development of these outcome-oriented solutions will meet the broad needs of the Canadian retail segment and their clients.”
He added, “We continue to find opportunities that allow us to showcase our skilled management teams, highly differentiated active equity strategies, and solutions focused on solving decumulation challenges.”
The ETFs are denominated in Canadian dollars and offered with hedged and unhedged units.
‘Directed Outcome’ funds
Guardian Directed Equity Path ETF (GDEP CN, GDEP/B CN)
The ETF seeks to preserve the value of its investments and provide long-term capital appreciation with reduced portfolio volatility by investing in global equity securities of high-quality companies. The strategy is based on a fundamental bottom-up approach and is aimed at investors looking for deliberate downside protection to allow them to remain invested in equity markets at all times. The portfolio is diversified across sectors and regions but maintains a US equity bias, targeting a minimum 50% allocation to US equities. It is relatively concentrated, typically holding between 20 and 40 stocks. The ETF intends to make monthly distributions, based on a targeted annualized monthly distribution of 4%.
Guardian Directed Premium Yield ETF (GDPY CN, GDPY/B CN)
The ETF seeks to provide long-term capital appreciation and to reduce portfolio volatility by investing in global equity securities of high-quality companies. The portfolio is diversified by sector and geographic region but maintains a US equity bias, targeting a minimum 50% allocation to US equities. It is relatively concentrated, typically holding between 20 and 40 stocks. The portfolio is constructed to drive steady tax-efficient cash flow, utilizing option strategies (covered calls and protective puts) to create a smoother return profile through time and targeting a persistent and sustainable distribution of 6% annually, payable monthly.
‘i3’ funds
The i3 strategies seek to achieve long-term capital appreciation by investing in portfolios of equities. They employ a system-driven, quantitative approach to assess relative value and capital growth potential within a broad stock-selection universe. This approach includes the use of machine learning techniques to analyze multiple fundamental factors and incorporate financial and alternative data. The strategies focus on identifying sustainable earnings growth from high-quality companies and avoiding areas of weakness, with stock selection the primary source of alpha.
Guardian i3 Global Quality Growth ETF (GIQG CN, GIQG/B CN)
The ETF invests in a portfolio of equity securities listed globally. Investments within each GICS sector will normally be within a range of +/- 30% of the corresponding sector weight of the MSCI World Index and investments in emerging market stocks are limited to 15%. The portfolio is broadly diversified, though more concentrated than your average passive ETF. It typically holds between 30 and 70 stocks, with the weight of any single stock capped at 10%.
Guardian i3 US Quality Growth ETF (GIQU CN, GIQU/B CN)
The ETF invests in a portfolio of equity securities of companies listed in the US. Investments within each GICS sector will normally be within a range of +/- 30% of the corresponding sector weight of the S&P 500 Index. The portfolio is broadly diversified, normally holding between 30 and 60 stocks. The weight of any single stock is capped at 10%. The fund may invest in an unlisted equity security if it is expected to become tradeable on a recognized exchange within 120 days of the time of issue.
Guardian i3 Global REIT ETF (GIGR CN, GIGR/B CN)
The ETF invests in a portfolio of publicly traded real estate investment trusts (REITs) and common stock of real estate operating corporations (REOCs) listed globally, offering lower correlation to traditional markets and sustainable dividend yields. The portfolio seeks out issuers that have the potential for both capital growth and sustainable dividend yield. It maintains a mid-large capitalization bias and is broadly diversified by issuer, sector and geographic region, though investments in emerging market securities are limited to 15%. The portfolio normally holds between 30 and 70 REITs and REOCs across a minimum of six sub-industries of the GICS Real Estate sector, and six countries. The weight of any single stock is capped at 10%. The fund may invest in an unlisted equity security if it is expected to become tradeable on a recognized exchange within 120 days of the time of issue.
The three i3 funds intend to make quarterly distributions, based on an assessment of the prevailing market conditions.