Horizons ETFs Management’s AlphaPro’s family of actively managed and specialty exchange-traded funds has reached USD2bn in assets under management (AUM).
Horizons ETFs offers 28 active ETFs managed by various portfolio managers, who aim to deliver better risk-adjusted returns than the broader markets they invest in or reference.
This is unlike passive or index-tracking ETFs, also offered by Horizons ETFs, which seek to replicate the returns of benchmark indices or multiples thereof.
In Canada, the vast majority of ETF assets typically track an index. However, the recent growth of Horizons ETFs’ actively managed funds suggests that investors see the value of incorporating both actively managed and passively managed investment strategies within their portfolios.
“Investors are recognising that ETFs have evolved beyond their initial roots of passively following the market, and can now be actively managed, while retaining their low-cost and flexible structure,” says Howard Atkinson, president of Horizons ETFs. “We strive to create ETFs based on the needs of investors and after carefully studying the active management space, we decided that actively managed ETFs could be an ideal solution for income-focused investors looking for portfolio manager expertise in a low-cost and flexible product.”
Currently, active ETFs make up approximately half of Horizons ETFs’ USD4bn in AUM and of these assets more than half are based on income-focused mandates. Actively managed strategies can potentially take advantage of market inefficiencies for income asset classes, unlike passive indexing strategies, and generate better returns.
“As a provider of both index-tracking and actively managed ETF solutions, we believe there is a place for both in investor portfolios,” says Atkinson. “We believe there are certain asset classes where an active approach could provide benefits over an indexing strategy, particularly in Canadian income-focused asset classes like corporate bonds and preferred shares, where indexing can be difficult to execute due to liquidity constraints and valuation issues for some index constituents.”
The AlphaPro family of active ETFs includes a suite of alternative strategy ETFs that give retail investors access to the managed futures asset class, as well as hedge fund-type exposure, which offer potential diversification and performance benefits for an investor’s portfolio.
