SVP behind ETF strategy explains why the ETF firm is launching 17 new products and the investment themes he sees advisors and investors seeking now
Launching seven products in a single day is certainly one way to complete a rebrand. After putting the old Horizons ETFs brand to bed the new Global X Canada launched seven new index ETFs last week. It’s part of a wider strategy under the new brand aimed at growing market share through the offering of a wide range of index, active, and strategically overlayed ETFs.
Nasseem Husain, Senior Vice President and ETF Strategist at Global X Canada explained that the seven products they just launched are part of a suite of seventeen new ETFs that the Global X brand is looking to push in Canada. He explained what he sees as the major demand drivers for Canadian ETFs among advisors today. To that end he explained why the firm is focusing on a range of new index products and how those index exposures might be able to help advisors and their clients going forward.
“We’re coming out strong saying we want to support the Canadian market and show Canadians all the different kinds of ETFs we know they use,” Husain says. “We can see that 49 per cent of the ETF assets in Canada are in broad market index products. Half of what Canadians want is that low-cost index solution. We also know that people like brands, whether it’s Coca Cola or Nike. In the investing world those brands are the S&P 500, the MSCI World, The NASDAQ 100, the TSX 60. People have comfort in those brands, they want those brands.”
Husain says that the new range of launches — a total of 17 products either launched or set to launch in May — are built around those core index allocations. They’re adapting those exposures with some strategic overlays that can help investors achieve somewhat different results. Namely, they’ve added ‘light leverage’ of roughly 25 per cent to some of their products. They’ve also added covered call overlays to other index products, allowing for additional income generation.
Husain says that while the product shelf is currently crowded in Canada, there is room for these variations on popular index allocations. He argues that individuals’ need for income, additional torque, or vanilla index exposure should drive some interest. He argues, too, that even as Canadians and their advisors want a varied range of products and means of accessing index themes, they also want to work with fewer providers.
“Do advisors want to have relationships with 40 different ETF providers?,” Husain asks. “One of the challenges is finding a way to narrow that shelf and have a partner who advisors can call to have a nuanced discussion with their wholesaler. They can do more with their portfolio, if they’re trying to bring down fees or generate alpha. Whereas with a shop that’s just index, index will be their answer. In a shop with just active, active will be the answer. We have everything.”
Canada already has a disproportionate amount of major index ETFs relative to the amount of capital in Canadian ETFs. For example, the US has four S&P 500 ETFs while Canada has nine. The US ETF market has ten times the assets of Canada. Nevertheless, Husain believes that Global X can distribute versions of these index strategies with enough appeal for yield or leverage hungry Canadians to make a wider impact.
Husain says that while index strategies are at the core of their current push, Global X will not be an exclusively index and index-variant shop. Their sister US-based firm, also called Global X, has a great deal of strength in thematic ETFs, something which he says Global X will probably leverage going forward. At the same time, he expects Global X Canada to pass some of their expertise about indexing and asset allocation on to the US offices.
Advisors, Husain claims, should see some of Global X’s new strategy as an extension of the changes that have already taken place through the rebrand and the global reach now behind the firm. Perhaps more importantly, he says they should be mindful of the continuity that exists from the days of Horizons through today and into the future.
“For advisors, their wholesaler coverage hasn't changed at all. It's the same people they've known and used for years,” Husain says. “What's actually come to a benefit them is now they have someone to go to about their Global X US ETF exposure. As we started talking about this rebrand, we found that there's a billion dollars in Canadian assets, buying us listed Global X ETFs. Now advisors have somebody that can call and ask about these things. We know that Canadians love cross border shopping, so now they have a trusted partner to help them do that.”
