For close to a century, mutual funds were the tool of choice for investors to build long-term wealth.
While they are still widely used and available, many investors opt for Exchange Traded Funds (ETFs) that offer lower operating costs, flexible trading rules, and are even more tax-efficient.
Perhaps the biggest benefit of ETFs though is that they truly let you be a passive investor.
By replicating the performance of a defined group of securities, investors can ‘buy the market’ instead of having to dig through the financials of specific securities.
Across both US and Canada, ETFs are a highly popular financial vehicle with total estimated assets of over $6 trillion (as per ETF.com).
This is partly due to the wide availability of ETFs from major providers on both sides of the border such as BlackRock, Vanguard, RBC iShares, BMO Global Asset Management, and more.
However, while ETFs are an exceptional tool, they should be evaluated carefully to ensure that they match your individual investment objectives.
Here are 5 new ETFs that launched in Canada in 2024 along with details on what type of investment objective they are best suited for.
1. FCCA – Fidelity All-Canadian Equity ETF
The FCCA (traded on the NEO Exchange) tracks the performance of underlying Fidelity ETFs that track Canadian equities.
As a result, investors gain exposure to a mix of Canadian growth and value stocks in roughly the same industry composition as the broader S&P/TSX index.
Holdings: The ETF is 100% invested in other Canada-focused ETFs administered by Fidelity. Holdings within the ETF include Fidelity Canadian High Quality ETF (25.0%), Fidelity Canadian Momentum ETF (25.0%), Fidelity Canadian Low Volatility ETF (25.0%) and Fidelity Canadian Value ETF (24.9%).
Risk Rating: Medium – The broad industry diversification of the Canadian equity market provides natural risk protection to investors.
Management Expense Ratio: While the MER is not reported yet (ETFs with less than one year of operating history only provide MER estimates as a full year of audited financial statements is yet to be received), the management fee is estimated to be 0.35%.
Net Assets: C$26.8M
Best for: FCCA is an ideal ETF for investors with a bullish outlook on long-term Canadian equity markets.
Data as of July 19, 2024.
2. RPLS – RBC Core Plus Bond Pool
The RPLS (traded on the NEO Exchange) provides investors with diversified fixed income exposure by tracking the performance of RBC Global Asset Management mutual funds investing in Canadian fixed income, global fixed income and emerging markets bonds.
Holdings: 98.8% of RPLS is comprised of fixed income funds managed by RBC GAM with the remaining 1.2% held in cash. Within the funds, approximately 55.1% of bond value is held in corporate bonds, 32.7% in government bonds, 7.5% in other fixed income and 4.6% in cash.
Within the funds, approximately 52.5% of bond value is held in corporate bonds, 33.7% in government bonds, 7.3% in other fixed income and 6.5% in cash.
Risk Rating: Low – Fixed income is generally considered to be a lower risk asset than equities. Additionally, the diversification by geography and type (investment-grade and high-yield) provides a further risk mitigation factor.
Management Expense Ratio: While the MER is not reported yet, the management fee is estimated to be 0.40%.
Net Assets: C$40.90M
Best for: RPLS is best for investors seeking diversification in their portfolio with a mid- to long-term investment horizon.
While capital appreciation is likely to be modest, this ETF can be used as a sound risk management strategy to round out your investment portfolio.
Data as of July 19, 2024.
3. AGLR – AGF Global Real Assets Fund
The AGLR (traded on the NEO Exchange) provides investors with long-term capital appreciation and diversification from traditional assets by investing in listed securities across the energy, materials, infrastructure, real estate and precious metals sectors.
Holdings: AGLR is broadly diversified across sectors that offer low correlation with traditional asset classes including energy (39.8%), materials (30.1%), real estate (14.5%), utilities (8.0%), industrials (6.9%), and financials (0.7%).
Risk Rating: Medium – While securities offer low correlation with traditional assets, the ETF also uses derivatives to manage risk.
Management Expense Ratio: While the MER is not reported yet, the management fee is estimated to be 0.60%.
Net Assets: C$149.5M
Best for: AGLR is best suited for investors seeking to hedge against inflation and diversify their portfolios away from traditional equity and fixed income markets.
Real assets (such as real estate and infrastructure) are more correlated to inflation, making them strong investments to consider in environments of rising inflation.
Data as of June 30, 2024.
4. TCSH – TD Cash Management ETF
The TCSH (traded on the Toronto Stock Exchange) is intended for investors seeking wealth preservation or growth on their savings.
By investing in money markets and short-term fixed income securities, the main objective is to help investors earn strong interest income while safeguarding capital.
Holdings: TCSH is comprised of money market securities and short-term fixed income securities issued by Canadian federal and provincial governments (T-bills or other debt obligations guaranteed by a government entity), corporations (term deposits, certificates of deposit, bonds guaranteed by the corporate, etc.) and trusts.
Risk Rating: Low – The ETF is primarily comprised of high-quality fixed income assets with low default risk.
Management Expense Ratio: While the MER is not reported yet, the management fee is estimated to be 0.15%.
Net Assets: C$181.60M
Best for: TCSH is ideal for investors who want to park their capital (or a portion of it) in a stable ETF that provides both security and a regular stream of interest income.
An additional benefit is also the ETF’s high liquidity.
Data as of July 22, 2024.
5. ARTI – Evolve Artificial Intelligence Fund
The ARTI (traded on the Toronto Stock Exchange) provides investors with exposure to publicly-traded companies from across the world that are poised to benefit from the increased adoption of Artificial Intelligence. Currency is hedged to the Canadian dollar.
Holdings: ARTI’s top 10 holdings include Apple Inc. (10.79%), Microsoft (9.91%), Alphabet Inc. (9.89%), Amazon.com Inc. (9.49%), Meta Platforms Inc. (9.47%), NVIDIA Corp (9.44%), Broadcom Inc. (7.41%), AMD Inc. (3.09%), Salesforce Inc. (2.79%) and Adobe Inc. (2.40%).
Risk Rating: Medium to High – While it is still early days to know which companies are going to be foremost leaders in AI, the fund’s global distribution mitigates some of the risk.
Management Expense Ratio: While the MER is not reported yet, the management fee is estimated to be 0.60%.
Net Assets: C$6.30M
Best for: For investors with a larger appetite for risk and a bullish outlook on the future of Artificial Intelligence, the ARTI is an excellent ETF to capitalize on the AI paradigm.
Data as of July 19, 2024.
