Purpose and Redwood switch to the NEO Exchange

President of the NEO Exchange says Purpose and Redwood will be able to give their investors additional value after switching from TSX

Purpose and Redwood switch to the NEO Exchange
The NEO Exchange has received an end-of-year boost after Purpose Investments Inc. was given conditional approval to switch certain Closed-End Funds and Unit-Traded Funds from the Toronto Stock Exchange (TSX).

Redwood Asset Management, a wholly owned subsidiary of Purpose, also intends to migrate its UTFs from TSX to NEO, which means the entire family of Redwood products will be housed on the NEO.

Subject to final approval, the funds are anticipated to list on NEO on December 28. It is a significant coup for NEO, with the CEFs and UTFs the first of their kind to list on the exchange and the first products to launch on the listing under the Purpose brand.

Jos Schmitt, President and Chief Executive Office of NEO, said its appeal to investors was simple: a fee structure that provides a better return.

“We have very interesting value proposition in the sense that the fee structure we apply for these types of funds is identical to the ones we apply to exchanged-rated funds.

“That makes a substantial cost differential, which at the end of the day impacts the management expense ratio which is paid by the investor, and by switching from TSX to us, effectively what you do is give additional value to your investors. So I think that is a straightforward reason to do that.

“[Switching to us] comes with benefits that we may have around us in terms of visibility, and the way in which we help organisations in creating visibility around them. But in this scenario, the benefit is definitely to the benefit of the investor in reducing the expenses they face where they hold units in funds.”

Schmitt believes Purpose and Redwood’s migration is further proof that NEO, which has been in operation for only two and a half years and had its first ETF listing in 2016, is heading in the right direction.

He said: “What everyone wanted to make sure of is that everything works well and that there are no limitations  or challenges from a trading perspective, market data perspective and access perspective, and everyone now starts to be 100% comfortable and then the reason [to change] becomes easy.”

He added: “Our mantra is always about doing what is right for the investor whether it is trading, listing, market data, just name it, and what is right for the issuer.

“So you start to see more and more recognition and alignment of that [with investors]. If you then eliminate any of the hurdles that someone may have in terms of either trading or having access to data then I think that positions us for a very exciting 2018.”