Consolidation within Canada’s ETF sector has ramped up as Toronto-based firms Evolve Funds Group Inc. and Sphere Investment Management Inc. have reached an agreement in which Evolve will acquire the management contracts for Sphere’s five ETFs.
Evolve will be adding approximately $68 million in assets under management (AUM) if the deal obtains unitholder and regulatory approvals. Evolve already has eight ETFs listed on the Toronto Stock Exchange that focus on niche investment themes such as gender diversity, cybersecurity, automobile innovation, global health care and cryptocurrencies.
“We are excited to expand and complement our existing product lineup with Sphere’s suite of ETFs,” says Raj Lala, president and CEO with Evolve, which launched in June, in a statement. “As an innovative ETF provider, this transaction will further deepen our commitment to providing Canadian investors with products designed to address the changing global economic environment.”
Sphere’s five ETFs — Sphere FTSE Canada Sustainable Yield Index ETF, Sphere FTSE US Sustainable Yield Index ETF, Sphere FTSE Europe Sustainable Yield Index ETF, Sphere FTSE ASIA Sustainable Yield Index ETF and Sphere FTSE Emerging Markets Sustainable Yield Index ETF — are expected to continue utilizing a strategy that follows the five respective FTSE sustainable yield indices.
“These ETFs will continue to act as a core holding for client portfolios, as they provide an opportunity for good risk adjusted returns and enhanced yield for investors,” says Keith McLean, Sphere’s chief investment officer, in a statement.
Sphere announced at the time of its launch in April 2016 that it was in the process of building a suite of specialized ETFs designed to help investors achieve low-cost diversification across asset classes and geographical regions, as well as meet various risk and return objectives. Sphere’s principals had said they saw lots of room for the firm’s factor-based, strategic beta (a.k.a. smart beta) ETFs and had intended to grow its offering to 30 ETFs within the next two years.
The firm had intended to follow the release of sustainable yield ETFs with products that focus on low volatility for choppy market conditions and growth-based ETFs for when markets rally.
The move represents the second major consolidation in the ETF space this year. Toronto-based WisdomTree Asset Management Canada Inc., the firm Lala left in late 2016 to launch Evolve, announced in late July that it had entered into an agreement with brokerage firm Questrade Wealth Management Inc. to take over management of the Questrade ETFs, while also becoming a “premier provider” of ETFs on Questrade’s self-directed platform
Unitholders of the Sphere ETFs will be asked to approve the transaction at special meetings to be held on Dec. 11.
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