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Three ETFs to start trading on Feb. 6

By Megan Harman |

XTF Capital Corp. has announced its plans to launch seven new exchange traded funds under the XTF Morningstar ETFs banner, which will offer exposure to indices that employ more analysis and screening than traditional index ETFs.

The ETFs, some of which will launch as early as next week, are the first in Canada to track indices from Chicago-based Morningstar, Inc. They include a variety of equity and fixed income ETFs.

The ETFs fit in well with XTF's mandate of providing investors with superior risk-adjusted returns, according to Barry Gordon, president and CEO of XTF Capital Corp. and its parent company, First Asset Capital Corp.

"Morningstar is world renowned for, among other things, the integrity and quality of its research, and they strive for better risk-adjusted returns," said Gordon. "So for us, it was a natural fit."

The XTF Morningstar ETFs offer exposure beyond basic market beta. The indices are created using research analytics that screen stocks based on such criteria as low price-to-earnings ratios, high returns on equity and high levels of cash flow relative to debt.

"What we're trying to do is construct and deliver ETFs that offer exposure to strategies and indexes that employ more analysis and professional review than traditional index replication ETFs," said Gordon. "XTF is trying to combine the best aspects of ETFs – transparency, liquidity and low-cost – with the best tools available to active managers."

Three of the ETFs — XTF Morningstar Canada Dividend Target 30 Index ETF (TSX:DXM; DXM.A), XTF Morningstar US Dividend Target 50 Index ETF (TSX:QXM; QSM.A) and XTF Morningstar National Bank Quebec Index ETF (TSX:UXM; USM.A) — will begin trading on the Toronto Stock Exchange on Monday, Feb. 6.
                                                           
Two more ETFs — XTF Morningstar Canada Value Index ETF (TSX: FXM; FXM.A) and XTF Morningstar Canada Momentum Index ETF (TSX:WXM; WXM.A) — are anticipated to commence trading on Feb. 15, while XTF Morningstar Canada Liquid Bond Index ETF (TSX:LXM; LXM.A) and XTF Morningstar Emerging Markets Composite Bond Index ETF (TSX:EXM; EXM.A) are expected to launch this spring.

XTF Morningstar Canada Dividend Target 30 Index ETF has been designed to replicate the performance of the Morningstar Canada Dividend Target 30 Index. This index reflects the performance of 30 dividend-paying, Canada-based equities, screened for, among other things, above-average returns on equity and high cash flows relative to debt. It has a management fee of 60 basis points.

XTF Morningstar National Bank Quebec Index ETF has been designed to replicate the performance of the Morningstar National Bank Quebec Index. This index, developed in association with National Bank of Canada, reflects the performance of equities with issuers headquartered in the province of Quebec, and is weighted according to the float capitalization of the constituent securities. It has a management fee of 50 basis points.

This ETF is the first in Canada to track an index of companies based in a specific Canadian province, according to Gordon. And he said it has an impressive track record.

"It's the first of its kind," said Gordon. "There's been nothing like it."

XTF Morningstar US Dividend Target 50 Index ETF has been designed to replicate the performance of the Morningstar U.S. Dividend Target 50 Index. This index reflects the performance of 50 dividend-paying, U.S.-based equities screened for, among other things, above-average returns on equity and high cash flows relative to debt. It has a management fee of 60 basis points.

XTF Morningstar Canada Value Index ETF has been designed to replicate the performance of the Morningstar Canada Value Index. This index is comprised of liquid equity securities of Canadian companies screened for low price-to-earnings ratios, low price-to-cash flow ratios, low price-to-book value and sales, and upward earnings estimate revisions. It has a management fee of 60 basis points.

XTF Morningstar Canada Momentum Index ETF has been designed to replicate the performance of the Morningstar Canada Momentum Index. This index is comprised of liquid equity securities of Canadian companies screened for above-average returns on assets and equity, with an emphasis on upward earnings estimate revisions and technical price-momentum indicators. It has a management fee of 60 basis points.

XTF Morningstar Canada Liquid Bond Index ETF has been designed to replicate the performance of the Morningstar Canada Liquid Bond Index. This index includes the most liquid Canadian dollar-denominated federal government, provincial government and investment-grade corporate bonds. It has a management fee of 30 basis points.

XTF Morningstar Emerging Markets Composite Bond Index ETF has been designed to provide investors with economic exposure (by virtue of a forward agreement) to the performance of the Morningstar Emerging Markets Composite Bond Index. This index includes the most liquid sovereign and corporate bonds issued in U.S. dollars by the governments and corporations in Latin America, emerging Europe, Africa, Middle-East and Asia. It has a management fee of 50 basis points.

Advisor-series versions of all of ETFs will be available. The equity ETFs will feature trailing commissions of 75 basis points, and the fixed income ETFs will offer commissions of 50 basis points.

Once the new ETFs are launched, XTF will have a total of 13 TSX-listed ETFs.