Frankfurt headquartered Solactive writes that after the Federal Reserve announced, in December last year, the intention to diminish its asset purchases, the interest rates have been expected to rise in 2022.
This prospect means banks and insurance companies are likely to increase their profit margins, which is leading investors to keep an eye on the sector as a strategy for their portfolio, the firm says. After recently launching the Evolve European Banks Enhanced Yield ETF, based on a Solactive index, Evolve Funds Group Inc now expands the engagement with Solactive through the release of another ETF tracking an index from the German index provider, designed for investors who seek exposure to the financial segment.
The new Evolve Canadian Banks and Lifecos Enhanced Yield Index Fund (BANK) seeks to replicate 1.25x the performance of the Solactive Canadian Core Financials Equal Weight Index, which tracks companies in the Solactive Canada Broad Market Index PR that are classified in one of the following industries: Life/health insurance, major banks, multi-line insurance, and regional banks. The fund will also write covered call options on up to 33 per cent of the securities in the portfolio, at the discretion of Evolve ETFs.
The ETF is trading on the Toronto Stock Exchange under the ticker symbol BANK.
Timo Pfeiffer, Chief Markets Officer at Solactive, says: “We are delighted to partner with Evolve once more for a product featuring banking, as the sector has been showing great potential of growth in the current environment with expected higher rates. We cannot wait to provide them with more indices for future products going forward.”
“After a wave of inflation, the Bank of Canada is poised to raise interest rates in 2022,” says Raj Lala, President and CEO at Evolve ETFs. “Financials, especially banks, tend to be beneficiaries of a rising rate environment. With strong balance sheets, relatively low valuations and sound fundamentals, Canadian banks are poised for potential dividend increases through 2022. Canadian financials have always been a staple in Canadian investor portfolios. This ETF provides investors with an enhanced yield from Canada’s ‘big six’ banks and largest insurance companies”.
