Almost 1,300 exchange-traded funds (ETFs) are available in Canada, reports Dave Roode, Vice-president & Director of ETF products and strategy at TDAM. That has dramatically affected how investors are accessing the market, and poses a challenge for them and their advisors.
“The diversity and breadth of ETFs allow investors to change their portfolios regularly, but the downside is you can have too many options,” says Roode.
How can you zero in on the right offering? TDAM has over three dozen ETFs, divided into broad-market index, ESG, thematic, quantitative, actively managed, and asset allocation ETFs. With that, investors can “invest for the core of their portfolio or add to an existing portfolio through a satellite approach,” Roode says.
These ETFs are part of one of Canada’s broadest investment offerings. Roode discusses how TDAM provides key solutions and opportunities through its ETFs.
What philosophy shapes your ETF offerings?
Roode: We’re client-centric and look to build products that fit investor needs at any time. We initially focused on what we’re known for: Fixed Income, Fundamental Equity, and Quantitative mandates like low volatility. But we continued to innovate with thematic strategies in technology and real assets, for example.
How does the mix of offerings suit investors’ varying goals?
Roode: All investors are different. We built products with this in mind. Investors can use our suite of solutions to build their core portfolios and add diversification components with asset classes they may not have considered.
What criteria have been considered in the selection of your special focus ETFs?
Roode: We look to identify gaps in the marketplace based on demand and where we can add value, leveraging our expertise. A great example is our technology ETF. There weren’t any pure-play technology ETFs on the market. Clients and advisors wanted a purer exposure, so we introduced the TD Global Technology Leaders Index ETF in 2019. Likewise, with healthcare, we leveraged a custom index that focuses on sub-sectors with more room to grow. With infrastructure, we took a global active approach that invests in not only the traditional infrastructure companies, but also the new generation infrastructure like payment networks. With real estate, we again took a global active approach, leveraging a team that has been doing this for many years.
Environmental, social and governance factors have become more important to investors. How can they be sure they’re getting best-inclass ESG companies?
Roode: ESG factors have a profound influence on valuations. Ratings firms use somewhat different terminologies, so, as an investor, it can be hard to know which ones to trust. We leverage Morningstar as the index provider, and Sustainalytics for the evaluations and ESG ratings. So we feel confident that our ESG solutions will help provide the exposure our clients are seeking.
How are today’s market conditions presenting opportunities in the ETF space?
Roode: We are experiencing uncertainty in economic growth, so we can see how different products perform in different markets. Lowvolatility solutions, for example, are built to provide a smooth stream of risk-adjusted returns. They’re expected to underperform slightly in bull markets, but outperform in volatile markets. Our TD Low Volatility ETFs are all showing their value and have been in the top quartile of their respective categories this past year. This presents an opportunity for advisors and investors to consider further diversification with low-volatility solutions.
What can you glean from investor trends in ETF selections?
Roode: When we look at who owns ETFs vs. mutual funds within the TD network, the numbers are interesting. Almost two-thirds of those who own TD ETFs but only about 10% who own our mutual fund assets are do-it-yourself investors. This is valuable information for advisors, because there’s a large opportunity to use ETFs to attract some of these DIY investors.
How do you assess the importance of passive vs. active management?
Roode: Having both options provides the full menu, allowing advisors and clients the ability to build a customized portfolio based on their needs. We also believe that every investment choice, regardless of whether it’s an index product or an active product, is an “active decision.”
What sets the TDAM approach apart?
Roode: At TDAM, we like to say “not all ETFs are created equal”. That means, taking a more focused approach and building products that seek to solve investors’ needs. With our 30-plus years in managing money for retail and institutional clients, investors can feel confident that we have the experience and expertise they can trust.
Learn more about the well-designed and differentiated ETF lineup from TDAM at www.td.com/etf
“Commissions, management fees and expenses all may be associated with investments in exchangetraded funds (ETFs). Please read the prospectus and summary document(s) before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. TD ETFs are managed by TD Asset Management Inc., a wholly-owned subsidiary of The Toronto-Dominion Bank. ®The TD logo and other trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.”