Mutual funds and exchange-traded funds have an outsized place in many investors’ portfolios – and will continue to do so.
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When looking at the make-up of most portfolios that financial advisors build for their clients, investment funds – namely mutual funds and exchange-traded funds (ETFs) – still play a massive role.
In many ways, that’s evident from recent Investment Funds Institute of Canada data. Total mutual fund and ETF assets under management (AUM) totalled $1.75-trillion and $250.1-billion, respectively, at the end of November.
But while mutual fund AUM still dwarfs that of ETFs, inflows into the latter were on pace to surpass those of mutual funds for the third year in a row, as ETFs are becoming the go-to investment vehicle for many Canadian advisors and investors.
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Nevertheless, mutual funds still have a key place in portfolios – and will continue to do so. Here are 10 articles on investing strategies using mutual funds and ETFs that were published on Globe Advisor this past year:
Betting on an economic recovery may be difficult for investors, given the rising number of COVID-19 cases in North America and new lockdowns in Europe. However, with a safe coronavirus vaccine on the way and China’s economy gaining strength, there’s room for optimism. We asked Daniel Straus at National Bank Financial Inc., David Kletz of Forstrong Global Asset Management Inc. and Alex Bryan of Morningstar Inc. for their top exchange-traded fund picks to play a post-pandemic recovery.
ETFs that offer juicy distribution yields have proliferated amid paltry interest rates over the past decade. Namely, Canadian-listed covered-call ETFs have grown to 66 offerings totalling $8-billion in assets under management. Although earning extra cash on top of dividends by using an options strategy may be tempting, investors need to mindful of the risks in owning these equity or commodity ETFs – and that they aren’t always the best choice for everyone.
Robots have been getting attention recently as health-care systems worldwide look for ways to cope with the COVID-19 pandemic. Specifically, robots are being used to clean hospital rooms and operating theatres, disinfect public areas and take temperatures and pulse as well as free up maintenance and medical staff for other tasks. For investors, it’s an area of opportunity as their uses are also expanding in sectors such as manufacturing and in e-commerce.
Liquid alternatives funds – known as “liquid alts” – have been available to Canadian advisors and investors for just more than a year, but they have spared no time adding these products to portfolios. Driving liquid alts’ popularity is their ability to offer alternative strategies such as short-selling, derivatives, leverage and others that were previously available only via hedge funds to qualified, typically high-net-worth clients, to a wider audience through a mutual fund or ETF.
ETFs are among the fastest-growing financial products in Canada, driven by advisors – both human and robo – as well as interest among retail investors. It has now been 30 years since the first ETF – Toronto 35 Index Participation Units, which were known as TIPs and tracked the TSX 35 index – was listed in Canada on the Toronto Stock Exchange. They have reshaped how advisors put portfolios together, including a shift away from individual stock picking and toward low-cost, diversified funds as part of a broader wealth-management offering.
Tom Bradley, chief investment officer at Vancouver-based Steadyhand Investment Funds Inc, which manages more than $900-million in investments for more than 3,000 Canadians and has a reputation for transparency, simplicity and low-fee equity and fixed-income mutual funds, has a strong opinion on how investors should prepare themselves for what lies ahead. “It’s a pretty boring answer,” says Mr. Bradley, who co-founded Steadyhand in 2006. “Stay diversified – and I mean really diversified.”
Platform-traded funds (PTFs), which launched in mid-2016 as hybrids between mutual funds and ETFs, are slowly showing up in more investors’ portfolios amid growing pressure for advisors to offer low-cost investment funds with an active management component. Yet, the relatively new hybrid investment fund still needs time to prove itself – and a wider selection of products – to attract more interest from financial professionals and investors.
In the world of thematic ETFs, recent offerings are aiming to ride the COVID-19 tailwind. But while hot trends may be enticing, investors need to tread carefully before buying niche ETFs to avoid overexposure to stocks they may already own – or wind up in money-losing funds. The benefit of thematic ETFs is that they can give exposure to names not represented in broad market indexes and also reduce risk from making “a bet on a single company,” says Daniel Straus, vice-president of ETFs and financial products research at National Bank Financial Inc.
Liquid alts have only been available to many Canadian advisors and their clients since January 2019, but it hasn’t taken long for these products to prove their worth in investment portfolios. Their recent strong performance in March, when stock market losses were at their deepest, is likely to lead to increased demand among advisors and investors who seek all-weather returns, downside protection and diversification from traditional asset classes such as stocks and bonds.
Decentralized cryptocurrency assets are still in their infancy and prone to hyper-volatility. Nonetheless, institutional and higher-net-worth investors are starting to pay attention to bitcoin for portfolio diversification. “We look at it as digital gold,” says Arthur Salzer, chief executive officer and chief investment officer at Northland Wealth Management Inc., a family office and advisory firm in Markham, Ont. “It’s a valuable addition as an alternative asset like private equity, private real estate and private debt. We also own physical gold through a Canadian fund.”
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
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