How TDAM is taking real estate and infrastructure ETFs to the next level

Jonathan Needham, Vice President, ETF Distribution - Eastern Canada at TD Asset Management Inc., on why popularity of ETFs will only increase

How TDAM is taking real estate and infrastructure ETFs to the next level

This article was produced in partnership with TD Asset Management Inc.

When it comes to finding the right ETFs, it pays off to think big.

What does this mean exactly? It means taking a global approach … as well as looking at wide-reaching, diversified sectors that can offer lots of opportunities.

Real estate and infrastructure are among these which is why, explains Jonathan Needham, Vice President, ETF Distribution - at TD Asset Management Inc. (TDAM), we set out to create differentiated active ETF solutions in these two unique TD ETFs.

“Certain sectors were impacted by the pandemic in many ways,” Needham reflects. “But when you look at it today, in both of those spaces [of real estate and infrastructure], you have quite a bit of upside potential, as the world starts to go back to somewhat normal. You're going to have an increase in those valuations that have been depressed as a result of the pandemic.”

Real estate is covered by the TD Active Global Real Estate Equity ETF (TGRE), which aims to provide regular income and achieve long-term capital appreciation by investing in, or gaining exposure to, the equity or equity-type securities of real estate investment trusts (REITs) and companies.

The infrastructure side of things, meanwhile, is covered by the TD Active Global Infrastructure Equity ETF (TINF), which takes the same approach to investing primarily in companies that own or operate infrastructure assets like roads, airports, ports, pipelines as well as new-age infrastructure assets like payment infrastructure.

And the focus on such stable areas – “infrastructure is the basis and the foundation we need in order to make things function,” Needham says, “while real estate is where we live and work” – makes the ETFs attractive prospects for those seeking stable investments. Think Real Assets, that we can touch and feel. 

Real estate and infrastructure at TDAM focus on a total return approach,” Needham explains, “which can make them suitable for clients that are seeking a steady, sustainable income stream, like less risk than the broad market and also desire capital appreciation.”

“Both real estate and infrastructure, in general, tend to have a lower volatility – which we seek to do in our offerings – than the broad market would offer. [With us] you're getting active management at a very low cost of 65 basis points. And, for those building a portfolio focused on total return, both of these strategies are medium risk.”  

But how has their popularity been faring so far?     

“Both ETFs have gained significant popularity,” he says, “both at the expense of traditional equity, but also as an alternative to some fixed income.”

“For a number of reasons, [the ETFs] are very attractive within this market backdrop. We've got really low yields – and it's been punishing to be a saver. So investors are seeking out yield. But they're specifically seeking quality companies that are providing sustainable yields. And personally, I think this is going to accelerate. Today these ETFs payout a very steady income stream, and our goal is for them to do so, one, three, ten years from now.  This is part of that attractiveness of owning real assets."

Buoyant real estate and infrastructure markets are one thing – but what’s clear is that the TDAM approach is also part of the ‘secret recipe’ that seeks success.

Among the ingredients is the legacy and expertise of Greystone Managed Investments1, a once institutional geared shop known for their expertise in alternative investing. With an influx of additional real estate and alternative investment professionals on hand, the Greystone acquisition has helped TDAM meaningfully expand their investment capabilities and in turn offer a more in-depth line-up of solutions.

“This Greystone team might be relatively new to TDAM, however they are not new to the industry and they really understand the drivers of return in these particular markets. We believe that these funds being active also gives us an advantage versus just going out there and blindly buying a strategy that tracks an index,” Needham says. “They have been investing in both private and public real estate and infrastructure for quite some time.”

“In addition, the portfolio managers of the TINF and TGRE ETFs use a proprietary regional selection model and different quants for different regions. They don't treat every region and or every sub sector the same. They identify the nuances and the differences of those and when it comes to identifying companies for inclusion in the ETFs, it is a team-based decision. So [you’re getting] lower volatility and better risk management from folks that have been doing this for multiple decades.”

For more related information regarding these TD ETFs click here to read the most recent TD ETF Blog on inflation.

Jonathan Needham is the Vice President of ETF distribution with TD Asset Management Inc., where he works closely with the wholesaling and national accounts team across Canada, with a focus on differentiating TD ETF offerings within the marketplace and driving market share growth.

1 TD Greystone Asset Management legally amalgamated with TD Asset Management on November 1, 2019.