In the ETF space, Sphere Investments is the newest of new kids on the block. Despite that, the firm has plenty of ambition to become one of the industry’s leaders. Having launched in April with four funds targeting Canada, the US, Asia and Europe, Sphere’s founder and CEO Lewis Bateman is planning to expand the company’s suite considerably. Speaking to Wealth Professional, he explains why he decided the somewhat crowded ETF market needed another provider in Canada.
“Traditional investors have finally started to realize the potential of ETFs,” he says. “The millennial generation are also doing a lot of direct investing. ETFs are liquid and information is readily available so they are a natural fit for younger investors. Some of the larger institutions are also saying they like the liquidity and transparency of ETFs and are using them as part of their core-asset allocation mix.”
So with the giants of the industry moving into ETFs much more, it creates a challenging environment for new entrants like Sphere. It’s a challenge its CEO relishes, however.
“I think it’s been great so far for us,” says Bateman. “We are not a large, bank-owned firm; we truly are an independent, Canadian firm and I think we are punching above our competitive weight. It’s a David versus Goliath mentality we have here.”
Having previously worked at the Toronto Stock Exchange, Bateman became familiar with ETFs and what they could offer clients. Subsequent stints with Horizons and First Assets then convinced him of the need to branch out by himself, leading to the formation of Sphere Investments in April.
“I thought I had a really good understanding of what clients want and understood all the different product suites out there,” he says. “What people want is transparent, smart-beta, or a factor-tilted solution-set that can help them with wealth creation. Sphere was born out of that.”
The four products the firm currently provides are Sphere FTSE Asia Sustainable Yield Index ETF (SHA), Sphere FTSE Canada Sustainable Yield Index ETF (SHC), Sphere FTSE Europe Sustainable Yield Index ETF (SHE), Sphere FTSE US Sustainable Yield Index ETF (SHU). Bateman explains the business model.
“Our exposures give us the ability to capture yields in those four regions,” he says. “We are looking to launch 30 ETFs over the course of the next two years. With those, we will have a low-vol suite and a high-beta suite. That means at any one time you’re giving the client a strong risk-return profile.”
Sphere has no shortage of competition out there in offering ETFs in Canada. As a result, it was imperative the firm attempted to distinguish itself from the rest.
“Our fees are exactly the same for each product – I don’t know any ETF provider that has done that,” says Bateman. “It’s 54 basis-points whether you want the Europe, Asia, US or Canada products. We want to simplify the process and have clients invest globally. Canada has one of the largest home investing biases in the world, yet we are only 3 per cent of the global market. Global diversification should be a priority.”