Toronto-based Evolve Funds Group Inc. has launched three new ETFs — Evolve U.S. Banks Enhanced Yield ETF, Evolve Active U.S. Core Equity ETF and Evolve Active Short Duration Bond ETF — that began trading on the Toronto Stock Exchange on Monday.
Evolve U.S. Banks Enhanced Yield ETF is designed to replicate the performance of the Solactive equal-weight U.S. bank index Canadian dollar hedged, while mitigating downside risk.
The ETF invests mainly in the Solactive index’s equities constituents while writing covered-call options on up to 33% of portfolio securities, at the discretion of the portfolio manager, the firm says in a statement.
“[The ETF] seeks to provide investors with both upside potential and enhanced yield in a low [interest] rate environment,” says Kirk Cooper, chief investment office with Evolve Funds, in a statement. “We believe the fundamentals for large U.S. banks are positive; they generally have excess capital, dividend payments have been increasing, and we believe they could benefit from any tax and regulatory changes in the U.S.
“In our view, active management of covered calls strikes a balance between generating yield and participating in any potential upside performance of the sector,” he adds.
Evolve Active U.S. Core Equity ETF aims to provide unitholders with long-term capital appreciation by investing mainly in equities of U.S. listed large-capitalization companies using a selecting process that combines quantitative techniques, fundamental analysis and risk management.
Minneapolis-based Nuveen Asset Management LLC will act as subadvisor for the ETF and Bob Doll, chief equities strategist with Nuveen, will serve as senior portfolio manager.
Lastly, Evolve Active Short Duration Bond ETF aims to offer unitholders a high level of current income through monthly distributions. Under normal market conditions, the ETF invests mostly in a diversified portfolio of below investment-grade corporate debt securities rated “BB+” or lower by New York City-based Standard and Poor’s Financial Services LLC and Fitch Ratings Inc. or “BA1” or lower by Moody’s Investors Services Inc.
The portfolio is expected to have a duration of less than three years, Evolve Funds says in a news relelase. Nuveen will also act as subadvisor for Evolve Active Short Duration Bond ETF.
“Active ETFs have been one of the fastest growing segments of the Canadian ETF industry,” says Raj Lala, president and CEO of Evolve Funds, in a statement. “This segment currently makes up approximately 15% of ETF AUM, but is trending upward. In fact, this year, there have been more sales in Active ETFs than all of 2016.”