Mackenzie's new active ETF strategies look familiar

Holdings will be similar but different from those of mutual funds managed by the same teams.

Rudy Luukko 22 November, 2017 | 6:00PM

The strategies of the three Mackenzie exchange-traded funds that opened for trading today on the Toronto Stock Exchange are all similar to those of existing Mackenzie mutual funds. The investment teams behind the new ETFs are also the same. However, as a Mackenzie Investments spokesperson pointed out to Morningstar, the ETFs are managed as separate portfolios and their holdings will differ from the mutual funds after which they are patterned.

Among the new offerings is Mackenzie Portfolio Completion (symbol: MPCF), which bundles together various non-traditional asset classes in a single ETF. Actively managed by Mackenzie's systematic-strategies team led by Rick Weed, Mackenzie Portfolio Completion is designed to complement an investor's core holdings in larger-cap stocks and investment-grade bonds.

The ETF's asset-class holdings and portfolio weights will vary, depending on the managers' proprietary quantitative models that factor in fundamental measures such as valuation, balance-sheet strength and quality, and the competitive landscape.

Among the non-core asset classes that may be represented are real-estate securities, infrastructure, small-cap equities, real-return bonds, asset-backed securities, loan syndicates, commodities, high-yield debt, emerging-market debt and emerging-market equities.

According to the prospectus, a significant portion of the exposure to these asset classes will be obtained by investing in other investment funds, including ETFs. Mackenzie Portfolio Completion may also invest directly in foreign currencies, or indirectly in these currencies through the use of derivatives.

The ETF's investment strategy will be similar to that of the $421-million Mackenzie Diversified Alternatives, which is managed by the same team and was launched in October 2015.

The other two new Mackenzie ETFs are:

  • Mackenzie Ivy Global Equity (symbol: MIVG), whose strategy is similar to that of Mackenzie Ivy Foreign Equity. Both the ETF and the mutual fund are managed by the Mackenzie Ivy team led by Paul Musson, which employs a blend of the growth and value investment styles in selecting individual stocks. The investment process considers expected growth, competitive position, management strengths, expected profitability, and financial position. Portfolio turnover tends to be low.

  • Mackenzie Canadian Short Term Fixed Income (symbol: MCSB), managed by the Mackenzie fixed-income team led by Steve Locke. It will invest mostly in investment-grade securities issued by governments, government-related entities and corporations. The weighted average term to maturity of the portfolio must be five years or less. Up to 15% of net assets may be held in securities of issuers that are rated below investment grade. The weighted-average credit rating of the portfolio must be A- or higher, as rated by Dominion Bond Rating Service, or an equivalent rating from another credit-rating organization. Up to 40% of assets may be held in foreign investments.

    The ETF's strategy is broadly similar to that of its mutual-fund counterpart Mackenzie Canadian Short Term Income, though there are differences in their stated risk constraints. For instance, the mutual-fund prospectus specifies a general upper limit of 30% for foreign content, which is 10 percentage points lower than the limit for the ETF.

 

ETF Symbol Mgmt Fee (%)
Mackenzie Ivy Global Equity MIVG 0.85
Mackenzie Portfolio Completion MPCF 0.60
Mackenzie Canadian Short Term Fixed Income MCSB 0.49
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.