New global and U.S. ETFs to provide defensive elements to investors' portfolios at a period of increased market turbulence
CI Global Asset Management (CI GAM) is planning to expand its ETF shelf with new minimum-downside volatility strategies.
The firm anticipates the new ETFs – the CI Global Minimum Downside Volatility Index ETF and the CI U.S. Minimum Downside Volatility Index ETF – will start trading on the Toronto Stock Exchange on or around January 24, 2023, subject to regulatory approval.
The CI Global Minimum Downside Volatility Index ETF will trade under the tickers CGDV (hedged common units) and CGDV.B (unhedged common units), while the CI U.S. Minimum Downside Volatility Index ETF will trade under CUDV (hedged common units) and CUDV.B (unhedged common units).
Roy Ratnavel, executive vice-president and head of Distribution for CI GAM, said in a statement, “At a time of heightened market volatility, these ETFs will provide a well-designed defensive component to investors’ portfolios.
“Unlike many other low-volatility funds, these mandates focus on managing downside volatility, with the goal of minimizing negative returns while still benefiting from rising share prices,” Ratnavel added.
The ETFs will track Solactive indexes designed to replicate the performance of corporate portfolios with lower downside volatility than the broader developed equity markets. Excessive sector concentration and turnover are avoided in the underlying portfolio construction.
The CI Global Minimum Downside Volatility Index ETF and the CI U.S. Minimum Downside Volatility Index ETF will reflect portfolios of international and U.S. companies, respectively.
In contrast to CGDV.B, which aims to mimic the performance of the unhedged Solactive DM Minimum Downside Volatility CAD Index NTR, CGDV will aim to mirror the performance of the Solactive DM Minimum Downside Volatility Hedged to CAD Index NTR.
CI GAM also proposed to merge three current ETFs – the CI MSCI World Low Risk Weighted ETF, the CI MSCI International Low Risk Weighted ETF, and the CI MSCI Europe Low Risk Weighted ETF – into the new CI Global Minimum Downside Volatility Index ETF.
Given that the continuing ETF is intended to produce lower volatility and greater risk-adjusted returns than the terminating ETFs, CI GAM expects that security holders will benefit from the mergers.
The management cost for the CI Global Minimum Downside Volatility Index ETF is also less than that of the terminating ETFs (0.35% vs. 0.60%). The mergers, if approved by securityholders of the terminating ETFs, will take place on a non-taxable basis on or after March 31, 2023.