Hamilton Capital, a Canadian issuer of ETFs specializing in the financial sector, has proposed a shake-up of its entire product suite.
Rob Wessel, Managing Partner of Hamilton ETFs.
The changes include the termination of the firms’ existing five ETFs as the funds merge with new lower-cost ETFs with slightly altered investment strategies.
Each new ETF will be listed on Toronto Stock Exchange and will offer a ten basis point reduction in management fee compared to the terminating fund.
Each merger requires unitholders within the ETF to approve the transaction in a special shareholder meeting due to be held on 17 June.
If approved, the mergers will be effective as of 26 June and will be implemented on a taxable basis.
Proposed changes
The C$50 million Hamilton Australian Financials Yield ETF (HFA CN) would be merged into the Hamilton Australian Banks Equal-Weight Index ETF (HBA CN).
The merger would transform the actively managed fund into an index-linked ETF providing targeted exposure to Australian banks through an equally weighted portfolio. The new fund would come with a management fee of 0.55%.
Rob Wessel, Managing Partner of Hamilton ETFs, commented, “Over the past several decades, Australia has had among the most resilient economies globally including relative to Canada. Upon completion of the proposed merger, we believe that the Hamilton Australian Banks Equal-Weight Index ETF will provide income-oriented investors the opportunity to diversify their Canadian financials holdings by gaining uncorrelated exposure to one of the best performing banking sectors.”
The C$20m Hamilton Global Bank ETF (HBG CN) and the C$50m Hamilton Global Financials Yield ETF (HFY CN) would both be merged into the Hamilton Global Financials ETF (HFG CN).
The mergers would enhance the diversification of the actively managed funds with the new ETF investing across the global financials sector rather than purely targeting banking or high-income stocks. The new fund would come with a management fee of 0.75%.
“We are pleased to announce the evolution of our global financials offering,” said Wessel. “We believe the proposed merger will provide numerous benefits to unitholders including lower fees and greater flexibility when making investment decisions in a large and dynamic universe.”
The C$10m Hamilton Canadian Bank Variable-Weight ETF (HCB CN) would be merged into the Hamilton Canadian Bank Mean Reversion Index ETF (HCA CN).
The merger would transform the rules-based, actively managed fund into an index-linked ETF although the funds’ strategies will basically be identical – providing exposure to Canadian banks while weighting constituents using a mean-reversion methodology. The new fund would come with a management fee of 0.45%.
Wessel said, “Mean reversion has been a dominant theme in Canadian bank investing for many years, especially during times of volatility and we believe the Hamilton Canadian Bank Mean Reversion Index ETF offers the potential for higher long-term returns and lower risk.”
Finally, the C$60m Hamilton US Mid-Cap Financials ETF (HFMU.U CN) would be merged with the Hamilton US Mid/Small-Cap Financials ETF (HUM CN).
The merger would allow the actively managed fund to expand its mandate to include the small-cap segment of the US financials sector. The new fund would come with a management fee of 0.75%.
“The expanded universe will give our team of financial sector specialists greater flexibility and a broader reach to take advantage of the most attractive opportunities in the US small and mid-cap financial services sector,” said Wessel. “Over the past twenty years, the mid-cap financials in the US have generated more than double the return of their large-cap peers and have been among the best performing categories in the entire global financial sector.”