Firm's sector-specific alternative mutual fund offering promises additional income above dividends earned
Another player has made its debut in Canada’s growing ETF industry.
Mulvihill Capital Management Inc., the trustee and manager of the Mulvihill ETFs, a division of Mulvihill, has announced the launch of the Mulvihill Canadian Bank Enhanced Yield ETF on the Toronto Stock Exchange (TSX). The ETF is now trading under the ticker symbol CBNK.
CBNK's investment objectives are to provide long-term capital appreciation to Unit holders through exposure to a portfolio of common shares of Canada’s Big Six banks – Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, and The Toronto-Dominion Bank – as well as monthly cash distributions.
Under National Instrument 81-102 Investment Funds, CBNK is classified as an "alternative mutual fund" and will use modest leverage of about 25% of its net asset value. CBNK will write covered call options and/or cash-covered put options on a part of the assets in its portfolio to create additional income beyond the dividends earned on the equity securities in its portfolio.
According to the long-form prospectus for the fund that was filed by Mulvihill, CBNK may purchase and hold virtually all its assets in common shares of the Banks to meet its investment goals.
It may also participate in securities lending transactions to generate additional income, provided that the securities lending transactions are compliant with applicable Canadian securities regulations and are compatible with the Mulvihill ETF's investment objectives and strategies.
CBNK is competing against enhanced yield ETF strategies that are also focused on the Canadian financial sector, including the recently launched BANK from Evolve Funds and HFIN from Hamilton ETFs.
