Transcript
NARRATOR: TD Asset Management welcomes you to this week's podcast. As a reminder, this podcast cannot be distributed without the prior written consent of TD Asset Management.
Brittany: Hello and welcome to TDAM Talks ETFs. My name is Brittany Puglia. I am the ETF Business Development manager here at TD Asset Management and I'm thrilled to be your host today. Exchange traded funds have been a game changer in the investment industry. They kicked off in the nineties as passive index funds for investors, but today includes both passive and active and are used by individuals as well as institutions.
TD was actually the first bank owned ETF provider in Canada back in 2001. The global ETF industry saw more than $856 billion inflow in 2022. This is the second highest level on record in 2021 with a $1.29 trillion dollars floating ETF globally. Today I have the pleasure of discussing our suite of ETFs with special guest Jonathan Needham, who is VP and Director of ETF Distribution.
Jon, thanks for joining me today. How are you?
Jonathan: My pleasure, Brittany. I'm wonderful and thanks for having me on today. Greatly appreciated.
Of course. Can you give our audience a little bit of your background and what brought you to TD Asset Management?
Jonathan: Yeah, certainly, Brittany. I mean, I've been in the financial services business now for about two and a half decades. I hate to say that if you could see me, you'd notice it by the gray hair. And I've worked at various asset management firms, mostly on the advisor distribution business and in sales marketing and in a senior leadership capacity.
And I joined TD just over three years ago really because of a few things. First and foremost, the leadership team, just an excellent group that's really committed to the business. Second, you know, the products, I mean, our portfolio management capabilities are exceptional, and we've been serving Canadians and giving them better outcomes for such a long period of time.
It was really, really attracted to me to be able to have those capabilities accessible in the ETF structure. And then of course, the third reason was, you know, an opportunity to rebuild and relaunch, if you will, the ETF business, here at TD Asset Management. And so, you know, it's been over three years and it's been a welcome change and a great group to work with and I'm extremely happy to be here.
Brittany: TDAM offers one of the broadest lineups of ETF in the industry with over 44 tickers. Let's start with our passive solutions. John, what does TDAM offer in the passive space?
Jonathan: Yeah. Thanks Brittany, we're fortunate here at TD Asset Management in the fact that we offer all the core building blocks needed to build a sound portfolio for the equity, fixed income, and special focus kind of bucket allocation of a portfolio. We also offer those solutions in ESG versions and we offer them at an extremely low cost. And we happen to be the only asset manager that actually manage these here in Canada and so by Canadians, for Canadians with a lens of a Canadian investor in mind all the time and with a team that's been managing index solutions for over four decades.
So, examples would be TTP for Canadian Equity, TPU for US Equity, TPE for International Equity TDB for aggregate bond exposure. And then of course, you know, multiple other tickers on the passive side for ESG exposure like TMEC as an example. And on the technology side, so lots of core building blocks, everything that's needed for clients to capture market exposure and at extremely low cost.
Brittany: How is the TDAM thematic lineup?
Jonathan: Yeah, thanks Brittany. This is an area where we've been building out and expect us to continue to build out, but our flagship product in this space is TEC. I always like to talk and tickers for those that are listening and that's our TD Global Leaders Technology Index ETF, really the gold standard in the industry for technology exposure.
Long story short, I'd like to say we built a better mousetrap for technology exposure again with the lens of a Canadian investor in mind. But we also have a very compelling offer in TDOC. And again, that's the ticker, which is our Global Leaders Health Care Index ETF. Again, improving upon what is in the marketplace with that Canadian investor lens in mind.
And of course, most recent addition is our carbon credit ETF. TCBN, which is quite a unique strategy in the market and one in which we're seeing our asset managers in particular use as a diversification strategy in order to get some of offsetting exposure to what is a pretty significant change in the industry and trying to reduce carbon credits and obviously get to standards.
And so you see TMEC, TDOC and TCBN are the three in the space today, but certainly expect more from us this time.
Brittany: Many of us know TDAM for low volatility investing. Can you talk to us about the quantitative ETF strategies?
Jonathan: Yeah, thanks, Brittany. I mean, we have such an amazing quant team here at TD Asset Management, you know, really, really impressive group which has provided such strong risk-adjusted returns for our clients, really quite exceptional outcomes, particularly on a unit of risk basis. We manage actually over $20 billion in this category, mostly for our institutional clients. And then we offer the expertise of our quantitative team to the mass market with the lineup of seven ETFs, ones that include, you know, dividend strategies like TQCD for Canada, TQGD for global - a multifactor strategies that captures all the factors that persist over time to help add outperformance relative to market. A US small mid-cap strategy, TQSM, one that I've certainly been adding to my personal portfolio lately and of course our low vol offerings, we've got three: one for Canada, TCLV, one for U.S. exposure TCUV, and one for International, TILV. And I'm a really, really strong advocate for evidence-based investing, and quantitative investing is just that; these are strategies that are designed and built to harness anomalies that persist in the market over time.
And so things like low volatility, which is a strategy that is really kind of counterintuitive to the traditional thinking of risk and return. It's based on the empirical evidence that the least volatile group of stocks would produce equal to better returns than the market over time. Very underappreciated factor, in my view, certainly warrants a core allocation in everyone's portfolio and when you can capture market returns are better with less risk.
It's amazing to me that more clients don't embrace this, at least on the retail side. Institutionally, as I mentioned, we've got a lot of support there and we're starting to gather more on the retail side as they understand it. And so, you know, it's one of those rare anomalies in the market, if you will. It's probably one of the only free lunches left in the business.
Anyway, I could go on at length about factors. Most listeners today are probably familiar with factors like growth, value, size, and quality. We have strategies that capture all of these factors, and like I said earlier, the outcomes for clients that own these has been quite exceptional.
Brittany: Thank you. What are the benefits of owning ETFs versus mutual funds or stock? And what about actively managed ETFs? How do they differ from the mutual fund wrapper?
Jonathan: Yeah, let's start with some of the same. I mean, an ETF is really the same structure as a mutual trust. And I can't emphasize that enough. I mean, the mutual fund is still an extremely viable product in the Canadian marketplace, and really the ETF is just a technological advancement on that structure that allows you to trade intraday.
So, you know, why is an ETF great? It's diversification and economies of scale really just a different wrapper trades like a stock and so the benefits include that intraday liquidity. They tend to be a little more tax efficient, obviously ease of accessibility. When I launch a new ETF, any client can buy it on their direct investing platform and or through their advisor and of course, plenty of choice.
Used to be able to say, you know, I've got an app for that. Now I can say I've got an ETF for that. So if you're looking for technology exposure, I've got that. You're looking for healthcare exposure. I've got that. Obviously, you know, you're looking for crypto exposure, I don't got that, but others do got that. And so, you know, there's a real benefit to being able to slice and dice the market to appease the client that's trying to build a sophisticated portfolio without taking on too much risk.
And then relative to individual stocks again - that instant diversification. And I think I can't stress that enough. The power of buying a basket of securities versus betting on a single horse is certainly a lot smoother ride for that investor. And then the final benefit is the same as a mutual fund that an ETF - is the professional money management.
Whether you're accessing an index, a solution, a factor exposure and or active, you are still getting a professional money manager or a discretionary portfolio manager who is a fiduciary to make sure that the client's best interest is in mind, is in charge of that pool of assets. And so lots of benefits, as you can tell. I'm rambling. I'm a little bit too passionate about ETFs, particularly as they pertain to helping our clients reach their goals.
All right. Enough about me, Brittany. I've been rambling. Do you mind sharing with the audience your background and what made you join the ETF team here at TD?
Brittany: Yeah, sure. Well, my career in the industry began in 2009 as a financial advisor in the U.S. having to build a business immediately following the financial crisis taught me a lot. After falling in love with the Canadians, I sold the practice that I had built over many years and came north of the border. They say it's usually for a love or a career, right?
I worked in ETF distribution ever since. What initially drew me to TD was the number of female leaders across the divisions of the bank, and that was just from the outside looking in. I came to TDAM to manage a national sales team supporting the TD financial planners. One project I proudly took on in this role was helping to launch ETFs to the financial planning business.
My team and I were tasked with educating planners on ETFs, including how they can play a role for their client planning needs. It also included educating the business on what ETF resources and support would be necessary for the channel to see success. When the opportunity to join your team of ETF specialist came up, it was without hesitation that I knew this would be my next step.
I'm very passionate about the future of ETFs and more specifically TD ETFs. Our lineup competes with the best out there as we've talked about. And when you have the depth of talent and experience that TDAM has, let's just say I wouldn't want to be anywhere else.
For most Canadians are lucky, TD Asset Management we're lucky and as TD ETF, we're certainly lucky to have you. So we're happy that you were brought here for love and your passion for the business is certainly - I've noticed that since you joined the team. I think your background and in dealing with that and investors is exceptionally valuable as well so that the clients listening today know that, you know, you've managed money, you've helped clients reach their goals, you've helped manage their expectations.
More importantly, you've helped manage their behaviours, which tends to sometimes hurt our long term goals. So pretty cool. So put your advisor hat on for a moment, since you built the practice, a successful practice, and you sold it - for somebody just starting out in their investing journey, what ETF solutions would you recommend to them?
Brittany: Our One Click ETFs or the one stop solution for any investors. So that would be TOCC, TOCM, TOCA. Simply put it, they combine our best thinking into one ticker. What I mean by that is each of the three solutions include both our top passive as well as our top active managed ideas, which are all overseen by our asset allocation team.
Having advised investors of varying degrees of experience using a low-cost single solution with a team of experts making day to day investment decisions allows you to set and forget your savings. If you can make a regular contribution, maybe that's monthly or quarterly, you can build it up without worrying, if you need to make any changes yourself. Then later, when you're investing needs evolve to be more complex.
It'll be time to sit down with a financial advisor, but I cannot stress enough the value of advice.
So, I have an interesting question for you, Jon. What is one common ETF myth that you have heard throughout your career that you would like to debunk for us today?
Jonathan: There's definitely a few for sure. I've heard more than I'd like to hear, to be honest. But the one that really drives me crazy is the liquidity discussion. Many investors still think that an ETF with low on-screen liquidity, meaning it doesn't trade much in the secondary market, is not liquid. And that is so not true. An ETF is as liquid as its underlying holdings.
So again, I'll say it again, an ETF is as liquid as its underlying holdings. And so plain and simple, regardless of the size of the fund, regardless how long it's been in the market, as long as the strategy is tracking a basket of liquid stocks, say the S&P 500 or the S&P TSX composite, it is liquid, extremely liquid.
In fact, I could launch a fund today seeded with a couple of million dollars and I could … the next day by a trade of $100 million and have no impact on those underlying securities. And I think that's the one I'll say that drives me the most crazy. There's many we'll get into that another day. I'm sure. But I think investors should know that as long as they've looked under the hood and call it the top ten securities that that ETF holds are pretty recognizable and pretty liquid. Microsoft and such comes to mind, that the ETF will be also equally as liquid.
Brittany: So how do our investors buy TD ETF and do you have any trading tips for our audience?
Jonathan: Yeah, I mean, the direct investing client, thankfully, can combine them on their, you know, discount brokerage platform. And of course, the client with a financial advisor can get them through them. So another wonderful thing about the ETF structure is once we launch an ETF, it trades on the exchange, and so it's widely available to all Canadians instantly. And so whether they're doing it on their own or doing it with guidance of a professional and or a combination of the two, they have access and availability immediately.
Brittany: So before we sign off today, do you have any closing comments for our listeners?
Jonathan: Yeah. Again, you know, thank you all for your time and attention today. It's greatly appreciated and thanks for considering TD Asset Management Exchange traded funds for your hard-earned dollars and your savings and investment accounts. You know, we at TD are fiduciaries and we have the best interests of Canadians in mind. We manage money for Canadians by Canadians with a lens of a Canadian investor mind.
And so not all ETFs are created equal. And we put a lot of thought and diligence into bringing market solutions for investors to the market. And essentially when we build and design products, they're there to help solve problems we know Canadians have. And so we're going to continue to do that. We can commit that to you. And I guess that's what I would leave you with this is thanks for your time and interest and we look forward to doing more of these in the future.
Brittany: Well, thank you, John, for taking the time today to dive into our lineup of media highlighting the quality and strength of our solutions that are built for Canadian investors. For all of you listening in, we thank you for tuning in. For more information on TD ETF, please visit td.com/ETFs and follow us on Twitter @tdam_canada or on LinkedIn at TD Asset Management to stay up to date on all ETF related podcasts and more. Lastly, if you have any comments or suggestions on what you'd like to hear more of, please email us at td.tdamtalks@td.com. Thank you for joining. Have a great day!
Disclaimer
ANNOUNCER:
1 “The Top 40 Money Managers” – Benefits Canada, November 2022 Edition.
The information contained herein has been provided by TD Asset Management and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax, or investment advice. Particular investment tax or trading strategies should be evaluated relative to each individual's objectives and risk tolerance.
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