New fund offers exposure to firms forecast to lead in growth sectors including cybersecurity, cloud computing, and genomics
Evolve ETFs has introduced a new ETF that aims to invest in companies expected to lead in sectors that are poised for future growth.
The Evolve Future Leadership Fund, now trading on the TSX as LEAD, aims to achieve long-term capital appreciation primarily through diversified investments in equity securities issued by domestically or internationally located companies, which are determined to be leaders in sectors that stand to benefit from medium- and long-term economic trends.
“Many companies with strong growth in the past haven't necessarily adapted their business models to remain as sector leaders in the future,” Evolve ETFs President and CEO Raj Lala said in a statement. “Additionally, there are a number of companies that are positioned to be future leaders in growth sectors, such as cloud computing, eGaming, cybersecurity, genomics and telehealth.”
Evolve is no stranger to building funds around strong investment themes. Its current shelf includes the Evolve Automobile Innovation Index Fund (CARS), the Evolve Global Healthcare Enhanced Yield Fund (LIFE), as well as the Evolve E-Gaming Index ETF (HERO), and the Evolve Cyber Security Index Fund (CYBR) – all covering sectors that, over the course of this year, have seen increased interest from investors. One product, the Evolve Innovation Index Fund (EDGE), provides one-ticket exposure to global companies that are involved in innovative or disruptive trends across seven industries.
What differentiates this new fund from EDGE is its wider investment mandate. Covering four sectors where strong trends are powering future growth – technology, healthcare, finance, and media and entertainment – it looks for companies that are defining waves of the future, but as well as blue-chip companies that are positioned to surf on those waves as well.
“What we wanted to do was provide one-stop exposure to blue chips that are going to continue to grow and adapt to a new digital economy, as well as companies that may not be leaders of their industry today, but are set up to capitalize on long-term trends and become industry leaders five or ten years down the road,” Lala told Wealth Professional.
Lala said that based on Evolve’s conversations with financial advisors, clients are much more heavily tilted toward blue-chip firms and not as strongly positioned for long-term world-shaping themes. With exposure to both future-proofed incumbents and the rising leaders of tomorrow, he said LEAD has the potential to play a core position in Canadians’ investment portfolios.
Another differentiating feature of LEAD, he said, is its more active approach run by Evolve as the portfolio manager. Unlike the index-based EDGE, the new fund will have an active covered-call overlay, with options written on up to 33% of the portfolio securities as required based on market volatility and other factors. As part of its portfolio selection process for LEAD, Evolve said it will combine quantitative techniques, fundamental analysis, and risk management.
“The covered call overlay is very important,” Lala said. “It creates an opportunity to provide yield for investors, as well as mitigate some downside risk.”
The Evolve Future Leadership Fund is available in hedged Canadian dollar-denominated ETF units (LEAD), as well as unhedged Canadian dollar-denominated ETF units (LEAD.B) and US dollar-denominated unhedged ETF units.