First Asset launches actively managed REIT and Canadian dividend ETFs

Rudy Luukko 10 September, 2014 | 4:40AM
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First Asset Investment Management Inc. today launched two actively managed exchange-traded funds on the Toronto Stock Exchange. They are First Asset Active Canadian REIT and First Asset Active Canadian Dividend. Both are available as common units or as advisor units, and both mandates will be managed internally.

First Asset Active Canadian REIT ETF will invest primarily in Canadian real estate investment trusts (REITs) and real-estate operating corporations. Up to 30% of the assets may be invested in non-Canadian securities.

The investment process involves analyzing the various real-estate sub-sectors and allocating weightings on the basis of the outlook for each of these sectors. In selecting individual securities, First Asset intends to identify REITs and companies that are trading at discounts to their net asset values or at relative discounts compared to other real-estate businesses. Other factors that will be considered include predictable and recurring cash flow, growth prospects, payout ratios, leverage ratios and the quality of management.

"Canadian property fundamentals have remained very solid over the last few years across most real-estate asset classes, with high occupancy rates and generally rising rents," lead manager Lee Goldman, a senior vice-president at Toronto-based First Asset, said in a release today. "This should lead to healthy cash-flow growth, which combined with well supported distribution yields in the 5-6% range, provides a very good return profile for the sector."

The lead manager of the other new ETF, First Asset Active Canadian Dividend, is Manash Goswami. In a release, he said the ETF will invest in companies "with strong free-cash-flow generation and the ability to sustain and grow dividends." Up to 30% of the assets may be invested outside Canada.

The investment process combines a top-down approach to sector allocation and a bottom-up, fundamentally driven approach to the selection of individual dividend-paying companies within sectors.

The management fee for the common units is 0.65% for First Asset Active Canadian REIT (FRF/TSX) and 0.55% for First Asset Active Canadian Dividend (FDV/TSX). For the advisor units, FRF.A and FDV.A respectively, the management fees are 0.75% higher to defray the costs of ongoing trailer commissions paid by First Asset to brokers.

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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.

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