U.S. Lags
While active ETFs are taking off in Canada, they account for only about 1 percent of the $2.1 trillion U.S. ETF market. The return of U.S. active ETFs has dropped 1 percent in the past year, compared with a 2.6 percent increase for passive.
The funds have struggled to gain traction in the U.S. because Americans tend to put more emphasis on cost when choosing investment vehicles to save for retirement, said Eric Balchunas, a Bloomberg Intelligence analyst in Skillman, New Jersey.
As well, in contrast to the U.S., Canadian regulators don’t require firms to disclose their holdings daily, Hawkins said. That reduces concerns over competitors front-running trades.
On the bond front, active ETFs don’t always have to sell assets to match an index’s move, reducing liquidity qualms, he added. Horizon’s C$555-million Active Corporate Bond ETF, managed by Fiera Capital Corp., is among the firm’s best sellers.
ETF Testbed
Hawkins, 47, took over in March as co-CEO of Horizons, a unit of Seoul-based Mirae Asset Global Investments Co. He primarily focuses on day-to-day operations of the firm’s Canadian, U.S. and Colombian operations while Co-CEO Taeyong Lee oversees the firm’s global businesses.
Horizons faces growing competition in actively managed ETFs including from First Asset Investment Management Inc., which has rolled out several products since September, including the First Asset Active Canadian Dividend ETF.
Canada has been an investment testbed since it debuted the world’s first ETF in 1990 with the Toronto 35 Index Participation Units. Horizons launched the world’s first leveraged commodity ETF in 2008. Its more recent products have included an ETF based on trades of corporate insiders.
ETF assets under management climbed to a record C$85.1 billion as of May 31, according to data from the Canadian ETF Association. Horizons has a 5.5 percent market share while leader BlackRock Inc.’s iShares has 54 percent, followed by Bank of Montreal and Vanguard Group Inc.