Scotia-branded ETFs rely on BlackRock's expertise

Multi-manager portfolios cover all major asset classes.

Rudy Luukko 30 May, 2018 | 5:00PM

Bank of Nova Scotia, the fourth major Canadian bank to sponsor a family of exchange-traded funds, has chosen to rely on the investment expertise of the biggest Canadian ETF provider.

Three equity ETFs -- Scotia Strategic Canadian Equity ETF Portfolio (SCAD), Scotia Strategic U.S. Equity ETF Portfolio (SUSA), Scotia Strategic International Equity ETF Portfolio (SINT) -- along with Scotia Strategic Fixed Income ETF Portfolio (SFIX), opened for trading today on the Toronto Stock Exchange.

All of them are multi-manager portfolios of underlying ETFs that will be selected and managed by BlackRock Asset Management Canada Ltd., which in turn draws on the expertise of other subsidiaries of its New York-based parent  BlackRock Inc. (BLK), the world's largest asset manager. The sponsor of the ETFs is Scotiabank subsidiary 1832 Asset Management L.P., which will have an oversight role while leaving day-to-day portfolio management to BlackRock.

Employing a strategic approach to asset allocation, BlackRock will invest in Canadian-listed ETFs for Scotia Strategic Canadian Equity ETF Portfolio, and in both Canadian and U.S.-listed ETFs in the three other portfolios. BlackRock may vary the holdings of underlying ETFs and their weightings.

Holdings may include passively managed index mandates, factor-based and fully actively managed strategies. Other than through investments in underlying ETFs that engage in currency hedging, the Scotia ETFs' exposure to foreign currencies will not be hedged back to the Canadian dollar.

The management fee is 0.45% for Scotia Strategic Fixed Income ETF Portfolio, and 0.6% for the three others. The management fee covers most expenses, and there is no duplication of fees charged by the underlying funds. According to the prospectus, 1832 Asset Management will absorb the management fees charged by all underlying ETFs.

Today's launches add another dimension to the ongoing ETF alliance between Scotiabank and BlackRock Canada, the market-share leader in Canadian-listed ETFs. The two organizations originally teamed up in January 2017, when five Dynamic iShares Active ETFs made their debut. For these ETFs, the roles are reversed, with BlackRock as the sponsoring firm and 1832 Asset Management hired as the sub-advisor. There now are a total of nine Dynamic iShares Active ETFs, with the most recent addition being Dynamic iShares Active Investment Grade Floating Rate (DXV), which was launched in March.

Now that Scotia is an ETF sponsor, Canadian Imperial Bank of Commerce remains the only one of Canadian banking's Big Five that remains on the sidelines of this rapidly expanding segment of the investment-fund industry.

ETF Ticker Mgmt. Fee
Scotia Strategic Canadian Equity ETF Portfolio SCAD 0.60
Scotia Strategic U.S. Equity ETF Portfolio SUSA 0.60
Scotia Strategic International Equity ETF Portfolio SINT 0.60
Scotia Strategic Fixed Income ETF Portfolio SFIX 0.45
Source: 1832 Asset Management L.P.

 

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
BlackRock Inc419.05 USD-0.45

About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to Morningstar.ca on topics involving fund industry trends and regulatory issues. He retired in May 2018 from his position as editor, investment and personal finance, at Morningstar Canada, where he had worked since 2004. He has also worked as an editor and writer for various general, specialty and institutional media, and he has co-authored courses for the Canadian Securities Institute. Follow Rudy on Twitter: @RudyLuukko.