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U.S. ETF provider WisdomTree Investments Inc. is boosting its Canadian presence after announcing it will be acquiring a portfolio of Questrade Financial Group's exchange-traded funds business.
New York-based WisdomTree is the seventh-largest provider of ETFs in the United States with $43-billion (U.S.) in assets under management. It first entered the Canadian market last July, but it was slow to gain traction with investors, with currently has $119-million (Canadian) in assets under management.
But those assets will now almost double as-upon regulatory approval - WisdomTree has agreed to pay $2.4-million to acquire and manage eight of Questrade's ETF products that have approximately $89-million in assets under management.
Questrade starting looking several months ago to exit the ETF business after conducting a strategic review, says Edward Kholodenko, president and CEO at Questrade.
"After a careful review, we decided that we wanted to focus on our core direct online business as well as our roboadviser business, both of which have seen fast paced growth, " says Mr. Kholodenko. "We were not as strong in the ETF business so we decided to exit it altogether and figured WisdomTree could do a much better job in providing low cost solutions to Canadians in the ETF space.
In addition, WisdomTree Canada will become one of the main providers of ETFs available for purchase on a Questrade's online self-directed platform. This will include all of the WisdomTree Canadian ETFs. Upon approval, most of the Questrade ETFs are expected to merge into existing ETFs managed by WisdomTree Canada, while WisdomTree Canada is expected to become the trustee and manager for one of the existing Questrade ETFs. In either case, this will result in a change of the fund manager for those Questrade ETFs, says WisdomTree.
"This partnership will be giving us preferred access to [Questrade's] client base with our research and our insights," says Kurt MacAlpine, acting country manager for WisdomTree Canada, on an earnings call Friday morning. "… [C]ommunicating our thought leadership to their clients and ultimately driving flows at the individual strategy level."
Upon approval, most of the Questrade ETFs are expected to merge into existing ETFs managed by WisdomTree Canada, while WisdomTree Canada is expected to become the trustee and manager for one of the existing Questrade ETFs. In either case, this will result in a change of the fund manager for those Questrade ETFs, says WisdomTree.
Existing subadviser relationships within the Questrade ETFs – such as those with Jarislowsky Fraser- have yet to be determined under the WisdomTree ownership.
Questrade will provide unitholders with further details of these transactions at a later date.
The partnership will also allow WisdomTree to jump into the Canadian roboadviser space as a consultant for Questrade's online portfolio manager- Portfolio IQ.
As well, the partnership will see both companies come together to develop and deploy a variety of ETF-focused educational initiatives and resources for Questrade clients, including webinars, newsletters and reports on investing topics.
The announcement comes on the heels of WisdomTree's one year mark in the Canadian industry - which saw slow growth for the newcomer with approximately $20-million in net flows in 2017. The asset manager is widely known in the U.S. as a pioneer of currency hedging in ETFs. Using a rules-based strategy, WisdomTree offers so-called "dynamic currency hedged" ETFs that reduce the volatility and downside of foreign-currency moves through complex calculations involving momentum, interest-rate differentials and valuation signals.
Clare O’Hara