By Rudy Luukko | 11/02/14

Toronto-based First Asset Investment Management Inc. is expanding its offerings of exchange-traded funds with four new equity mandates -- Canada, the U.S., Europe and global -- that are designed to be less volatile than the broad market benchmarks.

About the Author
Rudy Luukko is editor, investment and personal finance, at Morningstar Canada. Before joining Morningstar in 2004, he worked as an editor and writer for various general, specialty and institutional media. He holds a Canadian Investment Manager (CIM) designation and a Bachelor of Journalism degree from Carleton University. A former chair and founding member of the Canadian Investment Funds Standards Committee (CIFSC), he has also co-authored courses for the Canadian Securities Institute. He welcomes your comments at rudy.luukko@morningstar.com but cannot provide individual advice. Follow Rudy on Twitter: @RudyLuukko

Two of them -- First Asset MSCI USA Low Risk Weighted and First Asset MSCI Europe Low Risk Weighted -- opened for trading today on the Toronto Stock Exchange.

The two others -- First Asset MSCI Canada Low Risk Weighted and First Asset MSCI World Low Risk Weighted -- are scheduled to make their TSX trading debuts on Feb. 19.

Each of the risk-weighted indexes uses traditional market-cap-weighted indexes as a starting point for stock selection. Stocks with historically lower return variance are given greater weights in the risk-weighted indexes.

The risk-weighted indexes have had lower volatility in the past than the corresponding market-cap-weighted indexes. As well, there's a bias away from the large-cap stocks that dominate the market-cap-weighted indexes.

Barry Gordon, president of First Asset, said all of the MSCI Canada Index stocks will be represented in First Asset MSCI Canada Low Risk Weighted. But for the Europe, U.S. and World ETFs, only the largest 100, 150 and 200 stocks by market cap, respectively, will be used to create the low-volatility portfolios.

Though the four ETFs will be broadly diversified, Gordon notes that the stock-selection methodology imposes no restrictions on industries or sectors. As a result, sector weightings will vary from the cap-weighted MSCI indexes.

For instance, in First Asset MSCI USA Low Risk Weighted, the utilities sector is currently heavily overweight, while information technology is very much underweight.

First Asset has created common units and advisor units for each of the four new ETFs. The management fee, which also covers most expenses, is 0.60% for the common units. For the advisor units, which pay trailer fees amounting to 0.75% annually to brokers, the management fee will be correspondingly higher.

For the U.S., Europe and global funds, investors will have a further choice of currency-hedged or unhedged common units or advisor units. Each of these three mandates will therefore have four different purchase options, each with their own TSX ticker symbol. (See table.)

FundTSX symbol
(common units)
TSX symbol
(advisor units)
Launch
date
First Asset MSCI Canada Low Risk WeightedRWCRWC.AFeb. 19
First Asset MSCI USA Low Risk WeightedRWU
RWU.B (unhedged)
RWU.A
(RWU.D (unhedged)
Feb. 11
First Asset MSCI Europe Low Risk WeightedRWE
RWE.B (unhedged)
RWE.A
(RWE.D (unhedged)
Feb. 11
First Asset MSCI World Low Risk WeightedRWW
RWW.B (unhedged)
RWW.A
(RWW.D (unhedged)
Feb. 19
Source: First Asset Investment Management Inc.

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