Manulife launches smaller-cap ETFs based on Dimensional indexes

Rudy Luukko 27 November, 2017 | 6:00PM
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Manulife Investments today expanded its presence in exchange-traded funds with the launch of Canadian small- and mid-cap equity and U.S. small-cap equity ETFs. Like Manulife's initial line-up launched in April, the new offerings listed on the Toronto Stock Exchange are based on strategic-beta indexes created and maintained by U.S.-based Dimensional Fund Advisors.

Manulife Multifactor Canadian SMID Cap Index (symbol: MCSM) has as its reference benchmark the John Hancock Dimensional Canadian SMID Cap Equity Index (CAD). This index is a subset of securities issued by companies whose market capitalizations are between the 75th and 251st largest Canadian companies, as at the time of rebalancing.

The other new investment mandate is Manulife Multifactor U.S. Small Cap Index, which is available in either unhedged (MUSC.B) or currency-hedged (MUSC) units. The reference indexes are the John Hancock Dimensional Small Cap Index (CAD) and its currency-hedged equivalent. The index constituents are a subset of stocks issued by companies whose market capitalizations are smaller than the 750th largest U.S. company but exclude the smallest 4% of U.S. companies, as at the time of rebalancing.

In selecting securities for its indexes, Dimensional employs a rules-based process that incorporates sources of expected returns, classifying securities on the basis of their market capitalization, relative price and profitability. Securities with relatively high prices and low profitability are generally excluded from the indexes, which are rebalanced semi-annually. Cash distributions, if any, are to be made in mid-January and mid-July.

The management fee for the Canadian small- and mid-cap ETF is 0.60%. For the U.S. small-cap ETF, the management fee is 0.50% for the non-hedged units and 0.55% for the currency-hedged units. These fees cover most of the ETF operating expenses incurred by Manulife Investments.

Today's new listings bring to six the number of distinct equity mandates represented in the Manulife ETF line-up, joining Canadian, U.S. large-cap equity, U.S. mid-cap equity and international equity. Including both the unhedged and currency-hedged units, there are now a total of 10 TSX listings of Manulife ETFs.

Though Dimensional also sponsors a family of mutual funds for Canadian retail investors, Manulife has negotiated a seven-year exclusivity period for Canadian-listed ETFs sub-advised by Dimensional.

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About Author

Rudy Luukko

Rudy Luukko  Rudy Luukko is a freelance writer who contributes to 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.

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