Portfolio managers share their bleeding-edge investment approach, now made available to mass market by TD Asset Management
As TDAM has stepped up their suite of ETF product and asset allocation services for advisors and their clients, they’ve kept abreast of the changing makeup of modern portfolios and a growing demand for alternatives to provide that extra layer of non-correlated return investors need. In classic TDAM fashion, they’ve constructed their new alternative funds with a level of sophistication and depth that few can match.
That sophistication is informed by an acquisition TDAM made in 2018 of Greystone Capital Management Inc. Greystone had established itself as a leader in the alternatives space, both in the success of their portfolios and the wealth of intellectual capital they’d cultivated. TDAM, in acquiring Greystone, has put that intellectual capital to work, using the Greystone team’s unique insights and experience to create alternatives products to serve the retail investment market. Two former Greystone portfolio managers who now manage two of TDAMs flagship alternatives funds spoke to WP about how they’ve developed two products purpose built for the needs of a modern investor: the TD Active Global Infrastructure Equity ETF (TINF) and the TD Active Global Real Estate Equity ETF (TGRE).
“At Greystone, we took the view that by having a dedicated quantitative team, we could develop a better understanding of how markets operate,” says Jeff Evans Vice President and Co-Portfolio Manager of TGRE and TINF ETFs at TD Asset Management. “Through the TD acquisition we’ve had the opportunity to launch ETFs that use the Greystone process, integrating a quantitative screening approach combined with fundamental analysis…it’s become an opportunity to apply that Greystone structure into an ETF approach.”
Evans and Travis Wetsch, Vice President at TDAM and Portfolio Manager for the TGRE ETF, agreed that the current boom in alternative investments offers an opportunity for retail investors to diversify risk and create alpha through these unique asset class. In the management of both TGRE and TINF, they look to maximize these growth and risk characteristics for investors and turn these funds into real value adds.
Wetsch says that the novelty of alts as an asset class can be off putting to some investors and even advisors who had built their careers and portfolios on the old 60/40 asset mix model. His view is that more cautious investors should start by adding smaller exposures to alts subsectors with longer track records. The global infrastructure and global real estate sectors, he says, both have long histories of strong performance. At the same time, they haven’t always been headlining grabbers, meaning exposure and performance often comes at a more affordable price.
“Products like the TGRE and the TINF are designed so that they will mimic those real asset portfolios and strategies over longer periods,” Wetsch says. “They’re also built with an improvement in overall liquidity, so they’re easier for investors to manage allocations in the context of their overall portfolio. That's one of the benefits of managing those products through an ETF.”
Wetsch and Evans say both the TGRE and TINF are built with Greystone’s growth philosophy and disciplined approach. TGRE, as Wetsch explains, pulls from 50 to 80 globally available real estate securities diversified across regions and subindustries. Those securities are chosen from a universe of over 700 options, screened by quantitative and fundamental analysis to find strong long-term capital appreciation, strong management, and financial resilience.
Built into the portfolio are a set of min-max ranges relative to the benchmark that can mitigate the large volatility swings so many investors are wary of now. In addition to its growth objective, the fund seeks to maintain a lower volatility than the benchmark. Wetsch and the management team work, actively, to help ensure capital is protected in the face of today’s unprecedented uncertainty.
Evans, who co-manages both TGRE and TINF, says the infrastructure ETF is built with similar goals in mind, focusing on growth and positive momentum. Where TINF differs is in the diversity of subsets available in the infrastructure universe. TINF, then, invests in subsectors as diverse as pipelines, toll roads, and airports as well as what’s called “new age” infrastructure, the payments networks of companies like MasterCard and Visa.
In both of these funds, Evans and Wetsch say investors and advisors get a means of exposing themselves to alternatives with a long track record of performance and active managers deploying the deep intellectual capital cultivated at Greystone made accessible to the market in a way that only TDAM can.
“These products leverage our overall discipline and investment process, which has been proven time again,” Wetsch says. “They use the significant risk controls that we put into the portfolio to help minimize risk and they benefit from our regular discussions with the whole alternatives team at TDAM, situating these funds in a wider commitment to growth and deep understanding of market trends.”
To learn more about these and other ETFs offered by TDAM visit td.com/etfs
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