Mackenzie expands into passive investing

13 new index ETFs will be among the building blocks for five actively managed portfolio mutual funds.

Rudy Luukko 24 January, 2018 | 11:00PM

Mackenzie Investments today added a low-fee dimension to its family of exchange-traded funds and laid the groundwork for the launch on Jan. 29 of a suite of ETF-portfolio mutual funds.

Six index ETFs -- four in core equity categories and two in U.S. fixed-income -- opened for trading today.

There's much more to come next week, when seven other passive ETFs will make their debut. Once they are all listed, the 13 passive index ETFs will come close to doubling the total number of Mackenzie ETFs, joining the nine that are actively managed and six strategic-beta mandates.

Michael Cooke, senior vice-president of head of Mackenzie ETFs, told Morningstar the 13 new ETFs -- along with the existing ones – will be building blocks available for five Mackenzie ETF portfolios. These funds of ETFs -- consisting of Conservative, Conservative Income, Balanced, Moderate Growth and Growth strategies -- will be actively managed by Mackenzie's Symmetry team of asset-allocation managers.

The expansion into passive index funds, said Cooke, is also a response to the continuing evolution of the marketplace, and Mackenzie's strategy as a major asset manager to be able to offer a broad array of investment solutions.

Though Mackenzie's newest ETFs are passive, the company's pricing strategy is to be as aggressive as its low-cost ETF competitors. For example, the management fee is five basis points (0.05%) for each of the two Canadian equity ETFs, 0.09% for the U.S. equity and 0.20% for the international equity ETF. That makes them among the low-cost providers in their respective peer groups. As Cooke explains, passive ETFs are essentially like commodities in terms of their pricing. To avoid any fiduciary conflicts on the part of financial advisors, Mackenzie ensured that the index ETFs would be priced competitively.

The four new equity ETFs launched today invest in Canadian, Canadian large-cap, U.S. large-cap, and international large and mid-caps, respectively. All are based on market-cap-weighted indexes maintained by Solactive, which is based in Frankfurt, Germany. To follow on Jan. 29 are currency-hedged versions of the U.S. large-cap and international equity funds.

Mackenzie's most exotic equity-index ETF, investing in Chinese equities, will be launched on Feb. 1. Its benchmark is the CSI 300 Index maintained by Shanghai-based China Securities Index Co. As described in the Mackenzie prospectus, the CSI 300 Index is comprised of the 300 stocks with the largest market capitalization and liquidity drawn from the entire universe of listed A-shares. These are shares that trade in mainland China on the Shanghai Stock Exchange and the Shenzhen Stock Exchange, and whose prices are quoted only in Chinese renminbi.

Mackenzie's first two fixed-income index ETFs both invest in U.S. securities. One will hold U.S. high-yield bonds while hedging its currency exposure back to the Canadian dollar. The other, also currency-hedged, invests in U.S. inflation-linked bonds.

All three of the Canadian fixed-income index ETFs will open for trading on Jan. 29. Along with Mackenzie Canadian Aggregate Bond Index, investing in the broad investment-grade universe, there will be one dedicated to the short-term universe, and one investing in investment-grade corporate issues with maturities of one to five years. Jan. 29 will also mark the debut of an index ETF investing in U.S. investment-grade corporate bonds.

ETF Benchmark index Mgmt fee (%) Launch date
Mackenzie Canadian Equity Index (QCN) Solactive Canada Broad Market Index 0.05 Jan. 24
Mackenzie Canadian Large Cap Equity Index (QCE) Solactive Canada Large Cap Index 0.05 Jan. 24
Mackenzie U.S. Large Cap Equity Index (QUU) Solactive US Large Cap Index 0.08 Jan. 24
Mackenzie International Equity Index (QDX) Solactive GBS Developed Markets ex North America Large & Mid Cap USD 0.20 Jan. 24
Mackenzie U.S. High Yield Bond Index (CAD-Hedged) (QHY) Solactive USD High Yield Corporates Total Market Hedged to CAD 0.50 Jan. 24
Mackenzie U.S. TIPS Index (CAD-Hedged) (QTIP) Solactive US Treasury Inflation-Linked Bond Hedged to CAD 0.20 Jan. 24
Mackenzie U.S. Large Cap Equity Index (CAD-Hedged) (QAH) Solactive US Large Cap Hedged to CAD 0.08 Jan. 29
Mackenzie International Equity Index (CAD-Hedged) (QDXH) Solactive GBS Developed Markets ex North America Large & Mid Cap Hedged to CAD 0.20 Jan. 29
Mackenzie Canadian Aggregate Bond Index (QBB) Solactive Canadian Select Universe Bond I 0.09 Jan. 29
Mackenzie Canadian All Corporate Bond Index (QCB) Solactive Canadian Select Corporate Bond 0.30 Jan. 29
Mackenzie Canadian Short-Term Bond Index (QSB) Solactive Canadian Select Short-Term Bond 0.09 Jan. 29
Mackenzie U.S. Investment Grade Corporate Bond Index (CAD-Hedged) (QUIG) Solactive Select USD Investment Grade Corporate Hedged to CAD 0.25 Jan. 29
Mackenzie China A-Shares CSI 300 Index (QCH) CSI 300 0.65 Feb. 1
Source: Mackenzie Investments

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.