Manulife’s multifactor exchange-traded funds offer exposure to key parts of the market.
When Manulife launched its first exchange-traded funds (ETFs) three years ago, Canadian investors gained access to a unique multifactor approach that adds value beyond pure passive exposure to the markets. The Manulife ETF lineup also changed the game for advisors. While more traditional ETFs are commonly used to provide short-term, tactical exposure to the markets, the innovative Manulife ETFs provide options as core long-term equity holdings.
The initial four funds introduced in April of 2017 were joined by two more in November 2017 and one more in December 2018. Each benefits from a disciplined strategy founded on academic research and expertly implemented by Dimensional Fund Advisors Canada ULC, the subadvisor of Manulife Investment Management’s ETFs.
“As we think about how our lineup has evolved, we have been intentional in providing investors with access to different asset classes where our strategic beta, multifactor strategies seek to add value beyond pure passive – and where active managers may not provide the most efficient access point for asset classes or geographies,” says Mark Bankay, Head of ETF and Institutional Product, Manulife Investment Management.
“ As we think about how our lineup might evolve, the first consideration will be to ensure we are addressing investor needs.”
Each addition has been carefully thought out, with the goal of building a well-rounded platform that offers investors a range of choices for their portfolios. Today, Manulife Investment Management offers Canadian, U.S., international and emerging markets equity ETFs designed to meet the needs of investors at different life stages with different time horizons, risk tolerances and personal preferences.
|Current Manulife ETF lineup|
|Multifactor Canadian Large Cap Index ETF|
|Multifactor Canadian SMID Cap ETF|
|Multifactor U.S. Large Cap Index ETF*|
|Multifactor U.S. Mid Cap Index ETF*|
|Multifactor U.S. Small Cap Index ETF*|
|Multifactor Emerging Markets Index ETF|
|Multifactor Developed International Index ETF*|
|*Available in hedged and unhedged versions.|
The multifactor approach used by all these funds aims to provide higher potential expected returns in a way that makes intuitive sense to many investors. Lukas Smart is a Senior Portfolio Manager at Dimensional Fund Advisors. He says that instead of seeking information the market has yet to discover, as a pure active manager might, his team relies on the information that’s already built into market prices to determine which factors will contribute the most to potential returns.
“We provide systematic exposure to those portions of the market – to lower total market capitalizations (securities of smaller companies), to lower-relative-price securities (value securities) and to higher-profitability securities – and we do so in a balanced fashion that takes into consideration the interaction among the dimensions and takes into consideration the real-life costs of investing,” says Smart.
Peeking behind the scenes, it’s interesting to note that Manulife has seen advisor interest in its ETFs grow because of insights related to specific asset classes.
U.S. mid-caps: Finding opportunities in the middle
There was a clear interest from advisors in learning more about mid-cap equities, which tended to be underrepresented in their clients’ portfolios. Allocations to large-caps and smallcaps may have been easier to achieve, but mid-caps can offer an attractive balance between the stability that often comes from larger, more established businesses and the greater growth potential associated with smaller, more dynamic companies. The Manulife Multifactor U.S. Mid Cap Index ETF provides exposure to this important segment of the U.S. equity market, with an emphasis on the three equity factors linked to better returns: smaller market capitalization, lower relative share price and higher profitability.
Beyond Canada: Developed international opportunities
Similarly, advisors have shown continued interest in understanding opportunities beyond the United States and Canada. Investors have a natural tendency to invest “at home,” but international equities can be an important way to diversify equity exposure and capture long-term growth opportunities. In addition to providing exposure to appealing opportunities outside of Canada, the Manulife Multifactor Developed International Index ETF’s disciplined approach to multifactor investing provides the potential for outperformance versus the benchmark.
As Manulife’s ETF platform continues to mature, there is an opportunity to expand into a wider range of asset classes that can help advisors fill gaps in investor portfolios. Manulife is always looking closely at areas of the markets that may benefit from ETF strategies incorporating smart beta or active management strategies.
To learn more about ETFs, visit Viewpoints on the Manulife Investment Management website. And feel free to share this investor-friendly content with your clients. It’s an efficient way to get your clients up to speed on the basics of ETFs and other topics like single-factor versus multifactor strategies, so you can focus your conversation on which combination of asset classes will best position them to meet their long-term goals.
Meanwhile, boost your own expertise in applying ETF strategies to client portfolios by consulting with one of Manulife’s three dedicated ETF specialists – each eager to share broad and deep industry experience.