Redwood launches actively managed preferred-share ETFs

Morningstar Canada 15 March, 2017 | 5:00PM

Redwood Asset Management Inc. today launched two exchange-traded funds that hold actively managed portfolios of preferred shares. Investing in the United States and in Canada, respectively, both ETFs are listed on the NEO Exchange and are also available as mutual funds.

The U.S. mandate, Redwood U.S. Preferred Share, is brand new and is available in currency-hedged (RPU) and non-hedged (RPU.B) ETF versions, along with Class A and Class F mutual funds.

Redwood, a wholly owned subsidiary of Purpose Investments Inc., has hired Chicago-based Nuveen Asset Management to manage the U.S. portfolio. Nuveen's investment approach combines credit research with structural analysis to select high-quality investment-grade preferreds. The strategy's holdings include US$1,000-par preferreds that are sold over the counter to institutional investors, as well as exchange-listed U.S. preferreds.

The management fee is 0.80% for the ETF units and for the fee-based Class F mutual-fund units. The management fee for the Class A units, which pay annual trailer commissions of 0.75% to brokers, is correspondingly higher at 1.55%.

Today's other ETF launch is Redwood Floating Rate Preferred (RPS). Managed internally by Redwood, it's the ETF version of a $97-million mutual fund which has had the same name and the same strategy since May 2015.

The Canadian strategy emphasizes high-quality issues, though portfolio manager Steve Vannatta may also invest in preferreds that are below investment grade. The management fee is 0.75% for the ETF units, the same as for the Class F mutual-fund units.

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