Toronto-based First Asset Investment Management Inc. is launching two exchange-traded funds (ETF) that focus on the equities of companies with active share buyback programs.
The portfolios of First Asset Canadian Buyback Index ETF and First Asset U.S. Buyback Index ETF consist of companies that typically demonstrate strong cash flows and lower share price volatility. In addition, share buyback programs tend to trump dividends as a more tax-efficient way of returning value to shareholders, according to First Asset’s announcement released on Tuesday.
The companies included in the new products are based on those found within proprietary indices developed by Toronto-based CIBC Capital Markets Inc. It’s the first time the bank’s proprietary equity index strategies are available to retail investors through ETFs, the announcement states.
First Asset Canadian Buyback Index ETF will follow the performance of the CIBC Canadian buyback index while First Asset U.S. Buyback Index ETF will follow that of the CIBC U.S. buyback index.
“[The development of the two indices are] based on empirical evidence that shows that highly profitable companies with excellent core business models often have cash flows that exceed the required re-investment needed to support intrinsic growth and such cash flows are frequently used to implement share buyback programs,” the announcement states.
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