Traditional ETFs mimic an index whereas actively managed funds have a portfolio manager overseeing asset allocations.rvlsoft/Getty Images/iStockphoto
Mackenzie Financial Corp. is pursuing a strategy to broaden its product offerings beyond traditional mutual funds, a move that could see it sell exchange-traded funds for the first time and mark a further shakeup of Canada's wealth management industry.
The fund company has appointed Michael Cooke as senior vice-president, head of alternative products for Mackenzie Investments, a newly created position. Mr. Cooke was former head of distribution of Invesco Canada Ltd.'s ETF division, PowerShares Canada. He'll be considering products that could include hedge funds, liquid alternatives and actively managed exchange-traded funds.
As regulatory changes put pressure on fund companies around fee transparency, many are looking to offer low-cost solutions to keep clients in-house.
Last week, Mackenzie's parent company, Power Financial Corp., invested $30-million in Wealthsimple Financial Inc, a robo-adviser platform that builds automated online portfolios exclusively using ETFs.
Mackenzie offers approximately 91 mutual funds, with $76.4-billion in total assets under management. But it does not offer ETFs.
'We are intrigued by this space but we need to understand how we can add value to that space before we can step into it," Jeff Carney, CEO of Mackenzie, said in an interview.
Mackenzie will not consider offering traditional ETFs, but will explore those products using active management, said Mr. Carney.
Traditional ETFs mimic an index whereas actively managed funds have a portfolio manager overseeing asset allocations. Active ETFs make up approximately $8-billion of the $80-billion in ETF assets under management in Canada, according to Investor Economics.
"In the active space, it is up to your creativity," said Mr. Carney. "There are quantitative things going on in that space, and we see some of the competitors in that space using traditional management skills. If we were to play in that space, we would be taking advantage of our investment skills at Mackenzie to explore opportunities."
Horizons ETFs Management (Canada) Inc. is one of the largest actively manged ETF providers in Canada with $2.5-billion in actively managed assets. The company first launched an actively managed ETF in 2009, and now has 28 actively manged funds on its platform.
"We think actively managed ETFs will continue to be one of the fastest-growing areas of ETFs in Canada," said Howard Atkinson, president of Horizons. "A new entrant in the actively managed ETF space would help legitimize that industry. Once competition enters the market, fees usually compress and innovation increases, bringing more choice to the end investor."
Mr. Cooke is a well-known ETF veteran and his move to Mackenzie has raised eyebrows in the industry.
"This speaks to a rapidly shifting industry," said Yves Rebetez, managing director of consulting firm ETF Insight. "Clearly, the ETF industry is not going to continue to grow at a rapid pace without there being any response on the part of the mutual fund industry."
The banking sector has already entered the ETF space, with Bank of Montreal and Royal Bank of Canada both launching ETF platforms in 2009. Other banks could also eventually have their own offerings, said Mr. Rebetez.
Other players, including both mutual fund and insurance companies, could enter the market if ETF sales are open to include mutual fund advisers, an initiative currently being driven by the Canadian ETF Association (CETFA).
"I have felt for a long time now that it was inevitable that major asset managers would start looking at this space," says Mr. Atkinson, who is also chairman of CETFA. "I think it is more a question of when, not if. Whether it be banks, fund companies or insurance companies, one day they will all have an ETF offering."
Clare O’Hara