Head of Canada ETFs explains the strategy that brought his firm success in a crowded market
Pat Chiefalo knows that a Canadian ETF provider cannot succeed by attempting to do everything. Cheifalo is now four years into his tenure as head of ETFs & Indexed Strategies at Invesco Canada, where he has presided over a doubling of the firm’s Canadian ETF AUM from $3.9 billion in 2021 to $7.8 billion at the end of 2024. He acknowledges that in an ETF market as crowded as Canada, his firm had to be targeted, intentional, and directly attentive to the needs of financial advisors.
Chiefalo outlined what his team heard from advisors as they looked to grow their ETF business, and what they’re hearing from advisors now. He explained what the firm’s broader global growth strategy was and how it was translated into a uniquely Canadian context.
“When I joined around four years ago Invesco was really becoming determined and deliberate around driving ETF growth. We had been in the market for a number of years but senior leadership wanted to accelerate the ETF business globally,” Chiefalo says. “It took a lot of heavy lifting. We had to bring in a lot of talent, from internal and external channels… We know we can’t be all things to all people, so we determined what we offered and what our clients were looking for from us.”
Cheifalo says that the Invesco Canada team focused largely on advisors, who they identified as their core clientele for ETFs, despite having some business in the institutional and DIY segments. Those advisors, he explained, resonated with a few of Invesco’s strategies. Namely, their equal weight ETFs picked up significant flows on the back of concentration risk fears, especially in US equities. They also offered a bellwether NASDAQ 100 ETF which picked up momentum as US tech stocks outperformed broader markets over recent years.
During the 2022 bear market, when cash and cash equivalent products were some of the best performing assets available, Chiefalo says that Invesco’s product suite was ideally placed. He notes that the popular High Interest Savings Account ETFs “didn’t make sense to me at the time.” And, in fact, when those products were forced to revise their yields lower, Invesco offered cash equivalent products that could compete better. Chiefalo’s team has not been afraid to launch products either. They’ve notably expanded their suite of options overlay ETFs as the category has grown more popular among advisors.
Seeking input from advisors along the way, Chiefalo notes that there are some areas where Invesco tends to stay away from. Traditional market-cap index strategies, he says, are the existing wheelhouse of a few other major players. Invesco, he says, looks to complement advisor portfolios in different ways, offering those equal weight allocations or options overlays.
Working within a global organization with mutual fund channels and experienced managers, Chiefalo’s job is as much about what he doesn’t add to Invesco’s Canadian suite as what he does. His approach to managing that tension begins with having an on the ground team. He notes that sometimes global firms can parachute in strategies or even managers based in other regions. His team is in direct communication with advisors and based in Canada. That allows for a more responsive approach where feedback can be solicited for new ideas quickly and efficiently. He notes, too, that the team tries not to launch ETFs for their own sake.
“An ETF is a wrapper. In virtually every case, the wrapper doesn't really enhance the strategy,” Chiefalo says. “If the strategy makes sense, if there's persistent value, persistent alpha, persistent risk mitigation, if it's over a long period of time that the strategy is delivering what it's promised to deliver, then absolutely, it's a contender for us to think about putting it in an ETF.”
Amidst a fair amount of market and geopolitical turmoil, Chiefalo says he’s seeing significant demand from advisors for US equity products. The US, he notes, still appears to be the core market of choice. At the same time, he’s seen an appetite for more fixed income strategies as interest rates rest at more neutral levels. There is a growing consensus, he says, that fixed income can meaningfully contribute to total returns once again while offering a source of capital preservation.
Throughout those conversations, Chiefalo acknowledges the hard work of differentiating his firm’s ETFs in a crowded market. Canada has more ETFs per dollar of assets than the US market, and that gives advisors and investors far more choice. Cheifalo flips that view somewhat and highlights that the number of ETFs in Canada display a Canadian appetite for innovative strategies. Canadian ETF investors and advisors are willing to try novel approaches, and Chiefalo works to ensure that his team’s products can offer something new. It’s an approach that appears to be working.
“If you look at our strategies, we don’t have any copycats,” Chiefalo says. “A lot of our strategies are either some of the most cost-efficient, or they offer the best risk-return profile, or they have exposures you can’t get anywhere else. I have no qualms about making sure we keep a very focused product suite.”
