Horizons ETFs, a Toronto-based provider of exchange-traded funds, has announced that its family of actively managed ETFs has reached C$2 billion in assets under management.
Howard Atkinson, President of Horizons ETFs.
Horizons ETFs offers 28 active ETFs managed by various portfolio managers, who aim to deliver better risk-adjusted returns than the broader markets they invest in or reference. This is unlike passive or index-tracking ETFs, also offered by the provider, which seek to replicate the returns of benchmark indices.
In Canada, as elsewhere in the world, the vast majority of ETF assets typically track an index. However, the recent growth of actively managed ETFs suggests that investors see the value of incorporating both actively managed and passively managed investment strategies within their portfolios.
“Investors are recognizing that ETFs have evolved beyond their initial roots of passively following the market, and can now be actively managed, while retaining their low-cost and flexible structure,” said Howard Atkinson, President of Horizons ETFs. “We strive to create ETFs based on the needs of investors and after carefully studying the active management space, we decided that actively managed ETFs could be an ideal solution for income-focused investors looking for portfolio manager expertise in a low-cost and flexible product.”
Currently, active ETFs make up approximately half of Horizons ETFs’ C$4 billion in AUM and of these assets, more than half are based on income-focused mandates. Actively managed strategies can potentially take advantage of market inefficiencies for income asset classes, unlike passive indexing strategies, and generate better returns.
“As a provider of both index-tracking and actively managed ETF solutions, we believe there is a place for both in investor portfolios,” said Atkinson. “We believe there are certain asset classes where an active approach could provide benefits over an indexing strategy, particularly in Canadian income-focused asset classes like corporate bonds and preferred shares, where indexing can be difficult to execute due to liquidity constraints and valuation issues for some index constituents.”
Horizons ETFs believes that a combination of low management fees and portfolio management expertise can result in attractive long-term performance for Canadian investors.
“We have the longest track record of running actively managed ETFs in Canada and it’s gratifying to see that many of the ETFs we launched three or more years ago have established attractive multi-year track records, which have resulted in industry accolades such as Morningstar Canada and FundGrade awards,” said Atkinson. “The vast majority of more than C$1 trillion invested in mutual funds in Canada are with actively managed mutual funds; we believe that, as active ETFs develop track records of success, they will be viewed by a growing number of investors as a viable low-cost alternative to mutual funds.”
He added: “When we launched AlphaPro roughly five years ago, I don’t think anyone could have conceived how far ETF innovation would come; today investors are not only embracing actively managed strategies, but through low-cost ETFs, can now gain hedge fund-type exposure, which historically has only been available to institutions and high-net-worth individuals. We continue to demonstrate that ETFs have an untapped potential to transform the investment landscape and offer investors, of all levels, the tools they need to build better portfolios in a lower-cost and diversified manner.”