CI GAM CIO explains how plan sponsors can benefit from investment vehicle's evolution
While exchange-traded funds (ETFs) have been around for three decades, they continue to improve to offer a variety of benefits for investors.
“What we've seen over the over the recent years is an expansion in ETF offerings,” says Marc-André Lewis, chief investment officer with CI Global Asset Management (CI GAM). He says today, ETFs are much more diverse, and investors can get a very broad exposure with a lot more niche and targeted strategies.
“Investors still have traditional funds as their foundation, and then they will use ETFs for liquidity reasons or for targeted exposure or for tactical reasons.”
ETFs are similar to traditional mutual funds in terms of exposure, with the big difference being that ETFs are listed on an exchange so they can be bought and sold like stocks at any time of the day. This offers real-time liquidity that mutual funds don’t provide.
Along with the exposure, investors get the full cycle management that comes with stocks.
“I don't expect ETFs necessarily to be used as the sole exposure of a plan but, as a foundation, it's a very compelling solution and plans can be supplemented by those more targeted exposures,” says Lewis. He adds that the exposure would obviously be related to the objectives of the plan. “Different investors will find different combinations to work out.”
Lewis says that today it is possible to invest fully in ETFs, “because now there's an offering that's deep enough to do it.”
As of March 2023, CI GAM managed $18.3 billion over a portfolio of more than 75 ETF mandates, including liquid alternative strategies, covered calls, smart beta, active, digital asset, ESG, and smart beta.
“One of the things that distinguishes our offering is it's a combination of passive and active strategies,” says Lewis. “We have some clients which have the bulk, if not the totality, of their assets with us. So, it's important for us to be able to provide them with a wide spectrum of solutions.
“We offer the core foundational aspects which include passive exposure to well-known indices. We also offer a more thematic, which is much more targeted exposure. For example, we launched an ETF that provides exposure to cryptocurrencies.
“Also, in recent years, we’ve launched a series of ETFs which give exposure to the equity market, but also with a yield generation that comes from an options strategy.
“Ultimately, we're trying to build a comprehensive and broad suite so that investors can use them for different purposes.”
Lewis says plan sponsors can utilize ETFs for liquidity exposure management and that there are now more solutions at low cost so they are very efficient and viable alternatives to what they might traditionally own, such as pooled funds or traditional funds.
CI GAM now also offers its Asset Allocation ETF suite, which combines a variety of strategies.
The suite is comprised of six distinct portfolios calibrated at different levels of risk designed to align with an investor’s financial objectives. Investors can match their needs to the best mix of equity and fixed income as each of the six portfolios maintains its own distinct balance.
“There is a growing demand for simple solutions that provide foundational exposure,” says Lewis. “We think diversification is going to be much more important going forward than it has been in the recent past. The suite offers more asset classes to invest in with a decent expectation for returns.”
“They offer liquidity advantages and remove the burden to actually do the rebalancing and management of cash flows.”