Valerie Grimba:
Welcome to RBC's ETF Innovators. My name is Valerie Grimba and I'm director of ETF Sales and Strategy at RBC Capital Markets. Today, I'm delighted to be joined by Marc-Andre Lewis, executive vice president and chief investment officer at CI Global Asset Management. Marc-Andre, thanks for joining us today.
Marc-Andre Lewis:
Thank you very much for inviting me.
Valerie Grimba:
Now, Marc-Andre, CI has long been known as a leader in the Canadian investment space, particularly when it comes to active management. I was hoping you could walk through some of the things that you and your team are doing to deliver this best-in-class active management to Canadian investors.
Marc-Andre Lewis:
Yes, and you're right, we've been in that space since the 1960s. So I think we launched the first Canadian mutual fund in history. So that goes back a long-time way before me joining the firm, but I think we are really focused on fundamental research, having a lot of resources, deeply understanding what we invest in. And in the two years I've been here, I've brought my own expertise, which is I would say more asset allocation and risk management portfolio construction focused. I would say this combination is really, I think, what makes us powerful.
Valerie Grimba:
Of course. And then also the global experience as well, bringing that flavor to Canada. And then one of those places where you've really been ahead of the time, so to say is the world of covered call strategies. As one of your very first ETFs CI launched over 13 years ago, had an embedded covered call selling strategy. What do you think is making these types of products so popular right now? And then what should investors be looking for now that there are over 100 different products to choose from?
Marc-Andre Lewis:
It's a good question, and yes, there's been a lot of appetite. This appetite we've seen expand recently. I think the market turmoil we've seen over the last few years, I think as probably pushed a few investors to revisit a bit their risk appetite, but also their appetite for return with income. So I think what's good about covered call is that they bundle these two things together.
So by combining, if you want a portfolio where the core is still exposed to upside in the equity market, but by choosing a slice and writing options on it, we're able to provide interesting income. So I think there's been appetite for that. What's good also in the current environment is that [inaudible 00:02:42] interest rates also benefit on the option writing side of things. So although what you receive is a different type of yield, it still is somehow correlated to interest rates. So we've seen a lot of growth and appetite in that space. So I think that's where the appetite comes from and we're quite happy to be one of the leaders in the space.
Valerie Grimba:
Yeah, absolutely. And I think even your product lineup with covered calls strategies can make it actually a tactical investment. I think historically we never would've put those words together, but you can decide, "Oh, right now I think technology is looking toppy. I can switch into a covered call version of that and then switch back into an index." Another historically niche area of the investment landscape that CI has been a leader in is the world of liquid alternatives.
Now, even the term liquid alternatives is quite broad and I think sometimes it scares people off because I don't really understand it. And so since you've been such a strong leader in the space, I was hoping you could talk to some of your most successful products and ETFs that have combined a liquid alternative strategy within the ETF vehicle.
Marc-Andre Lewis:
Yes. So liquid als. Yeah, as you said, sometimes people are afraid of, because first there's alternatives and then we are derivative, leverage, short selling some of these things, if they're not done the right way can increase risk. But if done the right way, you can actually create something different. So their liquid alternatives, the building blocks are still assets you would find in traditional portfolios or strategies. But by managing them differently, by being more dynamic, by using some derivatives, by using short selling, you're able actually to produce a different risk return profile.
And what's very compelling there, this is not a race to know if liquid alternatives are better than traditional asset classes. "What we can show." And I think that's where the beauty of it is that actually if you take a portfolio whose core is traditional assets, there's a clear benefit from a robustness perspective and a diversification perspective from allocating a sleeve of it to liquid alts. So we have liquid alt strategies spanning a quite wide range of exposures, whether it's through equities, fixed income, or even commodities. Recently with an external partner, we're able really, I think, to help our clients to diversify and to bring more robustness to their portfolios.
Valerie Grimba:
Yeah, great. And it's great that you mentioned the commodity ETF as well, because that has been really successful, and we've seen a lot of interest in this space just because it's quite a unique offering that CI has brought to the table with that one. All right, so I'm going to shift gears here slightly and talk about the regulator slightly, which is something we don't often do here.
But the regulator has recently ruled on different treatment for the High Interest Savings Account product, which is colloquially known as the HISA ETF. That probably means some changes are going to come down the pipe when these rules take effect in a few months' time. How do you think investors should be thinking about this and are there any alternatives for them to consider as well?
Marc-Andre Lewis:
It's early, so it's still difficult to pinpoint exactly where things will land, but with the estimates we're running with, we still think High Interest Savings Account like these products are still going to be quite compelling alternatives if you look at the short-term interest rate exposures if you want. So we still think they're going to remain highly relevant products.
That being said, with all the noise this creates and all that, it was important for us to have also compelling alternatives in that space. So we have a money market fund, which is a plain vanilla type of product that has existed for a very long time, and we offered them an ETF space in [inaudible 00:06:38] structures. We have one Canadian, one US versions, both of them at very low 14 basis points management fee. So we think that's an alternative there.
I would say, and not to go into macro or asset allocation that the window for short-term investments, if you think peak rates our year or even behind us, which I would say is my main view. We're still, and we've developed mechanisms to incentivize our clients to also migrate to long-term assets, which I think is probably the next part of the cycle. So it was a good time for money market, probably the best time in a long time, but it's probably time to think about other exposures.
Valerie Grimba:
I think that's great. I'm so glad that you brought that up too, because it's one of those things that has been at the forefront of investors' minds. But you're right there, we're probably somewhat near the point where we need to be thinking further down the track now and that might not be in that area of the market anymore. So, Marc-Andre, CI has really been one of the pioneers really in the Canadian ETF space. You've been around for a long time. You've constantly been evolving your product lineup and delivering innovations within the ETF structure. Given that and looking forward, what gets you most excited about the future?
Marc-Andre Lewis:
You're right. We've been in that space for some time. We've always thought about being in front of the line, thinking about innovation and all that. And I'd say, "Always delivering it in a robust format." It's very important for me, it's very important for us to really be thoughtful about the way we approach innovation, but innovation is front and center in ETF space, so we want to stay there. We have 20 billion assets under management in ETF space, which makes us the fifth-largest provider in Canada, the first one that is not a bank.
This is where we are. When I look going forward, I would say, "Yeah, we keep on..." Clients are becoming more sophisticated. I think the adoption of ETF is going to continue to increase in portfolios. It's either than it was, there's still a lot of room to get. So I would say by looking at our platform, which has active management, but also by looking at different types of additional exposures we can provide to clients. We're always trying to look in a ways to expand the toolbox if you want.
Valerie Grimba:
Great. Yep. We're on the same page on all of those counts. So looking forward to growing business together. Thank you very much for coming in today.
Marc-Andre Lewis:
Thank you very much.