What’s behind firm's rapid AUM growth?

ETF specialist lures covered calls strategist from rival to spearhead further expansion

What’s behind firm's rapid AUM growth?

Advisors looking for portfolio options have been urged to consider one rapidly growing firm.

Toronto-based Hamilton ETFs, which began in 2009 and rebranded from Hamilton Capital Partners after it introduced its first ETF in 2016 and began focusing solely on them in 2019, has been expanding both its options strategies and staff over the past two years.

 “We are 10 times larger than we were pre-COVID,” Rob Wessel, its managing partner, told Wealth Professional.

“We’re a very important competitor in financials, especially Canadian banks, and we’re a very important competitor in covered calls. So, for people looking for Canadian financials, especially Canadian banks, we think we have the most robust suite of products and we’re the number two provider of Canadian bank ETFs. We have a very rapidly growing covered-call franchise. So, for people who are watching us, we are very, very different than we were even two years ago.”

Wessel said Hamilton ETFs’ assets under management (AUM) grew from $240 million in December 2019 to more than $2.4 billion now. That includes what it has gleaned from both financial exchange-traded funds (ETFs) and its increasing number of covered call ETFs.

Learn the basics of covered call ETFs, how they work, and the associated advantages (and risks) that come along with them.

“Despite entering the category of covered-call ETFs in July 2021, which is less than two years ago, we have covered call AUM of more than $1 billion,” said Wessel. Hamilton ETFs has taken in $800 million in this category in the past year. Its AUM is up 33% year-to-date and 70% in the past year.

Wessel attributed his employee-owned firm’s success not only to a lot of hard work, but launching innovative products that created an enhanced category of ETFs with a modest amount of leverage, which have really resonated with long-term investors.

“We’re not trying to be all things to all people,” he said. “We’re very strong in the financials, especially the Canadian banks, and income-oriented products. We’re building out pretty significant capabilities with cover calls.”

In January of this year, it launched its Hamilton Canadian Financials Yield Maximizer ETF. It does not have leverage, but it now has $325 million in AUM. In mid-June, Hamilton ETFs plans to launch the Hamilton Utilities Yield Maximizer ETF to go with it.

The firm has also introduced two broad-based enhanced covered call ETFs. The Hamilton Enhanced Multi-Sector Covered Call ETF was launched in July 2021 and now has $340 million of AUM. The Hamilton Enhanced U.S. Covered Call ETF, meanwhile, was launched in February 2022 and now has $460 million of AUM. These two both have modest leverage of 25% to enhance yield, and the pair generated $500 million in inflows in the past year.

Hamilton ETFs also has three Canadian bank ETFs, which have generated $230 million of inflows despite very challenging markets. Its Hamilton Enhanced Canadian Bank ETF is also the top-performing Canadian bank ETF.

The company’s other financial ETFs have also performed well. Its Hamilton Australian Equal-Weight Bank Index ETF, which was the top-performing financial ETF in Canada last year, was also the only financial ETF with a positive return.

“We’ve been in the right place at the right time. We have some products that resonate. They have much higher yields than your average ETF, and I think that’s a big part of it,” said Wessel. “As demographics change, people are searching for monthly income. Our products are attractive to them.”

The firm has also been growing its staff over the past year, adding five people so it now has 15 employees. It just hired Nick Piquard, formerly of Horizons ETFs, as its chief options strategist to manage its covered calls and spearhead its growth.

“Nick is one of the most experienced and respected options portfolio managers on Bay Street,” said Wessel, “and he will oversee our covered calls, including new launches.”

While Wessel said Hamilton ETFs staff is happy, it doesn’t want to take anything for granted since there are a lot of really great firms out there.

“Everything is moving in the right direction,” said Wessel. “But, it’s a lot of hard work – growing ETFs or having a successful launch or generating inflows. It’s like hand-to-hand combat where you’re just grinding it out every day, trying to generate inflows. It takes a sustained effort. But, it obviously helps to be in the right place at the right time, which we’ve been in the last few years.”