Eduardo Repetto & Caitlin Ebanks: Opening the Avantis CAGE | Rational Reminder 401

0:08 This is the Rational Reminder podcast, a weekly reality check on sensible

0:11 investing and financial decision-making from two Canadians.

0:14 We're hosted by me, Benjamin Felix, chief investment officer,

0:16 and Cameron Passmore, chief executive officer at PWL Capital.

0:21 And welcome to episode 401, and Ben.

0:24 The evolution continues.

0:26 And this week we were joined by a guest that a lot of listeners will know,

0:30 Eduardo Rapedto of Avantis.

0:33 And we're talking about the launch of the Avantis ETFs in Canada.

0:38 And the evolution certainly is continuing.

0:41 We talked about that in the episode,

0:42 but I think there's an exciting time for investors in Canada.

0:46 This is something that we we've been asking

0:47 Eduardo about since he this is his third time,

0:50 I believe, as a guest on the podcast.

0:52 We've asked them every time when when are you guys going to come to Canada?

0:56 Uh and they launched USITS products for for European

0:59 investors first and they they've they've launched in Australia,

1:02 I think it mentioned as well.

1:04 And and now they're finally launching products

1:06 in Canada in partnership with CIBC ETFs, which is pretty cool.

1:11 and they talk about uh Caitlyn from from CIBC and Eduardo

1:15 talk a little bit about the sort of genesis of that partnership

1:18 and the things that they had to agree on and did agree

1:22 on for this whole thing to to work from both of their perspectives.

1:25 But yeah, it's it's a super exciting time where uh we

1:28 we built some I mean Frankenstein's not not quite the right term,

1:33 but we we we hacked together some factor tilted model portfolios years ago.

1:38 Yeah.

1:38 I mean, it's kind of the the history of this podcast.

1:41 We were talking about dimensional funds,

1:43 which we use um like extensively at at PWL, and we would talk about,

1:49 you know, factor tilts and and small cap value and premiums

1:52 and multiffactor asset pricing and all that kind of stuff.

1:55 And we got feedback from listeners saying, you know, basically,

1:59 are you guys just trying to do a sales pitch by talking

2:02 about this stuff because we can't invest this way on our own,

2:04 so why don't you stop talking about it?

2:07 Uh and so we we had responded by saying

2:10 we're not going to stop talking about it,

2:11 but what we will do is create some models that you

2:14 can use to invest in a way that's somewhat similar.

2:16 And to do that, we used uh Avantis ETFs,

2:20 small cap value ETFs, which were US-listed at the time.

2:23 So we ended up with these I

2:25 mean not terribly complicated but relatively complicated

2:28 model portfolios where we could say okay

2:30 here now now you DIY investor who's listening

2:33 to this podcast you can invest the way that we talk about uh but it was

2:38 fairly complex and required US listed ETFs

2:41 and currency conversion and all that kind of stuff.

2:43 And so the fact that now Avantis has

2:46 launched Canadian listed products which can which hold securities

2:49 directly as we talked about with with Caitlyn

2:52 and Eduardo in the episode I think is really exciting.

2:55 Just that piece the fact that they're Canadian

2:57 listed and hold securities directly but then they're also

2:59 launching an asset allocation product which as listeners

3:03 know have have seen such great adoption in Canada.

3:06 It just makes this whole idea of factor investing

3:10 uh as accessible as market cap at least for equities and affordable

3:15 and affordable.

3:16 Yeah.

3:16 Super super low uh low fees.

3:20 Uh, so I think it's a, as you said, Cameron,

3:22 it's a it's a great continued evolution of access

3:25 to really smart investing for Canadians and it really takes away,

3:31 you know, in the past we've talked about factor investing.

3:34 One of the potential drawbacks is added complexity

3:37 and now at least from an implementation perspective, that barrier is is gone.

3:42 There's still other things like tracking error and stuff

3:44 like that that you've got to deal with.

3:46 But the implementation piece like this is now as easy as investing

3:49 in in XCQT or VQT or or whatever other equity asset allocation ETF.

3:56 Um anyway, so very exciting development and it

4:00 was really nice to have Caitlyn Ebanks, director of ETF strategy at CIBC,

4:06 uh along with Eduardo Rapetto on the podcast to talk

4:09 about really some of the nitty-gritty details of the products,

4:13 how they're thinking about this, how CIBC

4:16 is thinking about this lineup in Canada.

4:17 Like I know one of the concerns from uh from people

4:21 that I've been talking to about this similar to when Avantis launched

4:23 in the US is that these things need a lot of scale

4:26 to be viable and so people worry about the products closing down.

4:29 Uh I think we we had some interesting discussion around that.

4:33 Uh yeah I exciting development for Canada and this was

4:38 a really interesting conversation with the people behind it.

4:45 Beautiful.

4:44 Anything else to add?

4:46 Uh listeners probably know who Eduardo is, but I I will just mention he's

4:50 the chief investment officer of Avantis Investors.

4:53 He's responsible for directing the research, design,

4:55 and implementation of their investment strategies

4:58 and providing oversight of the investment

5:00 team and the firm's marketing activities and also interacting with clients.

5:03 He's doing a bit of everything over at Avantis.

5:06 Uh and of course prior to Avantis uh being established in 2019,

5:10 Eduardo was the co-chief executive officer,

5:14 co-chief investment officer and director

5:16 at Dimensional Fund Adviserss up until 2017.

5:20 So he's deeply ingrained in the in the factor investing world.

5:27 And Kaitlin Ebanks is the director of ETF strategy for CIBC.

5:31 before that she was at Black Rockck and also Beimo on the ETF side.

5:36 So, she has tremendous experience in the ETF space.

5:41 Yeah.

5:41 Very cool.

5:42 Well, we hope listeners uh enjoy this conversation

5:45 and and like like we've said multiple times now,

5:48 I think this is an exciting an exciting time for Canadian investors.

5:53 All right, let's go to it.

5:57 I did just want to say a couple things

5:58 before we go to the conversation with Caitlyn and Eduardo.

6:02 One is that the emerging markets product for Canada will

6:06 not be launched by the time that this episode is released.

6:09 Uh there's still a few things that they're

6:11 working on with a couple of the markets.

6:13 So, they didn't have a date for when it will be launched,

6:15 but it's it's they're actively working on like it's

6:17 coming soon pending certain approvals in in different countries.

6:21 Uh but as of the time as of the date that this episode is released,

6:24 it's highly unlikely that it will be uh live yet.

6:29 Uh I also want to mention that we, you know,

6:31 we we gave a pretty glowing review of of Avantis here.

6:35 Uh and we think that they do a great job and and always have.

6:40 We don't have any financial relationship with them, though.

6:42 Just to be clear, we're not being paid by them to to sing their praises.

6:46 Uh we've been talking about their products since 2019 when they first launched.

6:50 And uh that's just because we think

6:52 that they're doing they're doing interesting work.

6:55 They're doing a good job creating uh good

6:57 quality lowcost products that are not gas station sushi.

7:00 But we have zero financial relationship with with them.

7:05 Uh so I just wanted to make sure that that was that was clear.

7:08 I also want to mention that during the conversation,

7:11 Eduardo does talk about expected premiums over a market cap weighted portfolio.

7:17 Just in talking about what should we expect these tilts to produce that I just

7:21 want to make sure it's clear to listeners

7:22 that when we're talking about expected premiums,

7:25 that's like a a modelbased expected return based on some combination

7:29 of uh future expectations and what has happened in the past.

7:33 And so when when Eduardo talks about that type of a performance,

7:36 it's an expected premium, but there's going to be a lot of noise around that

7:41 absolutely that realized outcome.

7:42 I mean, we we've seen that with factory tilted portfolios uh in the US

7:47 and in Canada over time where even if the expected premiums are positive,

7:52 there can be extended periods of time where the realized premium is negative.

7:57 So, just to be clear, Eduardo is not saying,

8:00 you know, you should expect a 2% return premium every year.

8:04 Uh, that's the an expected return and there's going to be

8:08 in real life a lot of noise around that estimate,

8:12 including the potential for many years of underperformance.

8:17 Absolutely spot on, Ben.

8:19 All right.

8:20 Now, let's go ahead to our conversation with Kaden Lee Banks and Eduardo Reto.

8:26 I've got one more quick disclosure for you guys

8:28 because we're talking a lot about specific investment products today.

8:32 From time to time, including today,

8:34 we talk about various funds that may be available in the US or in Canada.

8:38 We do not consider our discussions to be anything more than an opinion.

8:41 And we want to remind anyone who might be considering investing in one

8:44 of these funds after listening to our show

8:46 to carefully consider the investment objectives,

8:48 risks, charges, and expenses of the funds before investing.

8:52 A perspectus and or the summary perspectus should be available on the issuers's

8:56 website from your financial professional or by contacting the issuer directly.

9:01 You should read those documents carefully before investing.

9:03 It's important to make sure any funds you choose

9:05 to invest in align with your goals and risk tolerances.

9:12 Eduardo Rapto and Caitlin Ebanks, welcome to the Rational Minder podcast.

9:17 Thank you for having us for having us.

9:18 Yeah, it's a pleasure.

9:20 It's a pleasure to see you guys again.

9:21 Yeah, good to see you as always, Eduardo and and Caitlyn,

9:24 nice to have you on the podcast for the first time.

9:26 Thank you.

9:27 Uh, so Eduardo, Advantis has passed 125 billion in AUM,

9:32 which it's got to be some kind of record

9:33 for a brand that's only six or seven years old.

9:36 Why do you think these products are getting so much traction?

9:39 Yes.

9:39 Six and a half years.

9:40 That's that's impressive.

9:42 I remember when we spoke the first time.

9:45 Look, we are we are extremely thankful to all the people that trusted us.

9:50 We started with no money, very little volume.

9:54 You don't know what it is being sitting in the trading

9:56 deficit with ATF in the market and seeing no volume.

9:59 Suddenly you see 100 shares and you look around and say who was that?

10:02 Because you say who make that trade and one day we couldn't

10:05 find who was making that trades and was the wife of a friend.

10:08 So now it's it's impressive.

10:13 But look when we started and I think I would mention before I always

10:16 think analogies trying to learn from businesses

10:20 and analogies and imagine that you are starting

10:22 a a business like a restaurant you know you want it to be full what are

10:27 you going to do you want to try to have very good food very good service

10:32 and also low fees prices so for us it's a saint to say it's it's

10:37 a business I mean it's a service business at the end of the day and so

10:40 we said look we need to we need to have good strategy and that's something

10:44 that is a must and we started

10:46 with what we thought it was amazingly good strategies.

10:49 We said we need to have good service and that's great and we are

10:52 going to have low fees and we have you have cutting technology to develop

10:56 the strategies you're very careful when you manage it should be good the problem

11:01 that people don't know you know you have no track record say how can

11:04 I know that you're going to be managing them right and and what not

11:08 and there were tons of fear mongers out there with alarms oh they don't

11:11 have enough people we don't have armies

11:14 of unnecessary employees for me and and so

11:17 some people trusted on day one without knowing that we could do it.

11:21 The lack of the strategies they were hopeful

11:23 that that we were going to deliver but that hope

11:26 is that trust we are extremely thankful and you

11:30 know and today we deliver no 125 billion

11:34 is just just a measure of success that we

11:38 are delivering that's what we care we're delivering

11:40 to our clients we're delivering to all the people

11:42 that trust us and we're very happy about that.

11:45 Yeah.

11:46 So I'm curious, Eduardo,

11:48 how did you decide to partner with CIBC

11:50 to launch your Avantis products in Canada?

11:54 You know, I called you Carmel and you didn't answer.

11:57 So I said, who can I call now and it it was a it was a tough one.

12:05 No, no, we have been speaking with CIBC from day one.

12:09 So we spoke with SEC for the first time around six years

12:14 ago I think at 2019 and we explained everything that we were doing.

12:18 we explain all all our philosophy we explain everything but you know we didn't

12:23 have track record and so the conversation kind of died off but around a year

12:28 ago they they pick up and I guess that CBC live with what we

12:34 are doing what we described to them but the main issue that they have is

12:38 that they need a little bit more track record to trust what we're doing

12:43 and they saw the growth they saw the reputation they saw the name part

12:47 of the our name recognition come from you guys having us here and and so

12:51 a year ago we start picking up

12:54 in the conversations and we decided to do it together.

12:57 Look, we have been we I know that we have flaws from Canada

13:02 even though we are not selling in Canada the US the US

13:05 based records and we we we have flows from Canada and and so

13:11 we know that there is interest there you guys told me that also

13:15 and so but Canada is a huge country is you know you have

13:18 from one place in one corner to another corner it's a huge country

13:22 with a lot of people and we advantage cannot service and remember service

13:26 is part of the offering all the time and so CIBC has a reach.

13:32 It's a very trusted company.

13:33 We know them for a long time and so we

13:36 look at the each other and say let's do it together.

13:39 The problem that you have when two companies are offering a product at the end

13:43 of the day is that the finance departments of both companies say I want

13:48 to make so many basis points and the other companies say I want to make

13:51 so many basis points and you add both and you finish with three and a half%.

13:55 I don't know how what number you end

13:56 that and that's bad but the beauty is that on day

14:00 one we were very clear both sides about

14:03 that this is what we should charge to be fair

14:07 to the investor and we will deal with the the the finance

14:10 departments telling them we have to live within

14:13 this expense ratio both of us because if not we

14:17 don't have an offering that's it there's not waste time

14:20 and and and that's that's a framework that many times

14:23 is very difficult to do and we were able to.

14:27 We were very lucky that we were able because both companies

14:30 are very clients focused and and so that's how we came

14:34 to market and we have been working for a year trying

14:36 to get this up and running and and the cordiality the client focus

14:43 is there and the reaction of people out there you know

14:48 in Canada I'm I was in Montreal Otawa now in Toronto and some

14:54 of our our colleagues have been in other places in Canada

14:58 together with the CIBC forks and the reaction has been extremely good.

15:02 We're very happy.

15:04 So I hope we can really provide

15:06 an amazing service together to the Canadian investors.

15:11 Yeah.

15:11 And and from our perspective at CIBC um as Eduardo

15:16 mentioned everything that we do is with the client focus.

15:20 So, when we looked to build out our our ETF shelf,

15:23 because we are a little bit late to the ETF game uh in Canada as well,

15:27 we've had ETF since 2019, but we're really now starting to make that splash.

15:32 Um we we started with portfolio construction.

15:36 So, every product on our shelf has a spot in a in a portfolio.

15:41 We started by switching our uh beta strategies to MSEI and to Footsie.

15:46 Um so, institutional quality benchmarks.

15:48 we leverage our existing active capabilities.

15:51 But then there were some opportunities for us to bring in specialty managers.

15:55 Um and and that's where Avantis came in.

15:57 Um incredibly wellrespected uh very very good at what they do,

16:02 very transparent as well in their offerings.

16:05 So if you are building a portfolio,

16:08 what you want is for your manager to do what they say

16:11 that they're going to do and they and they've proven that they've done that.

16:14 So from our perspective,

16:16 we're super excited to bring these to market

16:18 to the Canadian investor and Canadian dollars.

16:22 Yeah, it's cool to hear how how

16:23 that all came together between the two organizations.

16:27 It's very difficult to two organization.

16:29 I I I look I I look I'm old so I've been through this many times.

16:32 between two organization and try to bring something to the market.

16:35 It's very difficult to agree on pricing because everyone wants

16:40 a lot of aces points on the end of the day,

16:41 but there is no room if you want to be competitive

16:44 and you want to be fair and and and it was great.

16:47 If you solve that one, I'm sure you can solve anything.

16:50 Yeah.

16:51 Yeah.

16:51 I know.

16:51 when I've we've talked for years now, Eduardo,

16:53 about you guys potentially coming to Canada and that that was always

16:56 one of the concerns that if you were going to partner with somebody,

16:59 you were worried about the fees coming in too high

17:01 and you just wouldn't launch the products in that case.

17:03 Uh so it's great that you guys were able

17:05 to find a partnership where everybody agreed on on low fees.

17:09 Can you guys talk about what strategies you

17:12 have launched and will be launching in Canada?

17:16 Yes, absolutely.

17:16 And the beauty that you know this strategy is probably better than me

17:20 because you are so analytical and and look at this in great detail.

17:24 Some of the strategies are basically the same

17:26 strategy that we have in in United States.

17:29 It's is a different rapper is is is

17:32 Canadian rapper instead of being a US rapper.

17:34 But for example, we have a US equity strategy.

17:38 I think at the ticket is CA US is very very similar to AB US.

17:43 You know the benchmark is Russell 3000.

17:46 And that's a product that I'm very very

17:49 proud of because if I tell you we launched that one heavy US six and a half

17:53 years ago it underways large growth in general underweights

17:57 large growth you know is more specific

18:00 but in general terms underweights large growth large growth over

18:03 the last six years and a half has

18:05 outperformed the Russell 3000 by three and a half%.

18:08 So you say you're underweight the large growth large

18:10 growth outperformed the Russell 3000 by three and a half%.

18:15 You are eating dust.

18:16 You're behind the benchmark for sure.

18:18 No, it's ahead.

18:20 It's ahead.

18:21 So that's telling you that that the way they were

18:23 approaching investment can reduce the weight of those those companies

18:27 and find other opportunities other companies that have higher expected

18:30 returns that are more than compensating for that that underweight.

18:35 So it's amazing.

18:37 So that's one of the projects US

18:39 equities that's up and running is listed already.

18:44 We are going to have a an immersion market equity that is the same as ABM.

18:51 You know ABM today ABM is the the largest

18:56 non-index strategy in United States ETFs has seen tremendous following.

19:05 I always thought about ABUV as a call following.

19:08 ABM has also sold following it has outperformed the benchmark around 2% a year

19:14 and and and basically following the same

19:17 approach that AB us apply to emerging markets.

19:20 We ABUB you know that very well I remember

19:23 the survey that you did about going to an island.

19:26 So our international small value and so we are bringing auv also to to Canada is

19:33 the ticket is going to be cauv and we are bringing also well auv is live

19:42 and in cauv is live then we're bringing cv so the large value version of abuv so

19:54 in the US we have av Our US

19:56 large value strategy has also has done tremendously well.

20:00 Not only we manage ETF, we manage a fund.

20:03 We have a significant money.

20:05 So advisory business also in the US in in large value, not only in small value,

20:10 a very big following and we're doing a globally

20:13 small value that is going to be listed tomorrow Friday.

20:21 So, so that's that's the same as thinking about ABUB plus ABDB together.

20:28 If someone wants a one-stop shop in global is more valid,

20:32 that is what we're providing there.

20:35 Now, we're in Canada and in the US people think

20:39 about international developed markets as Eye plus Canada all together.

20:44 Since we're in Canada, we have to split it apart.

20:47 So we're going to have an ify product that is going to be also

20:51 live on Friday tomorrow and that if product is going to be the same

20:58 as ABDE but without Canada and then we're going to have Canada in isolation

21:03 that is already up and running is CIC is our Canadian equity strategy.

21:09 Now all these are kind of targeting US

21:14 international emerging Canada small caps large caps volume.

21:19 Now we're going to have like a fun of funds a global

21:22 equity strategy that is an ETF of ETF like a fun of funds.

21:26 It's an asset allocation like a funds

21:28 but an ETF of ETF that is our global equity

21:32 strategy that's going to come to market next week

21:36 and it's going to invest in our Canadian equity,

21:39 US equity, international equity,

21:41 emerging equities and an extra juice there by having a global small value.

21:48 So that's an asset allocation in equities

21:51 and in the future we'll have more products.

21:54 uh we we we probably have balanced strategies that not only

21:57 equity but also mixed fixed income but we're listening we're listening

22:00 to people like you we're listening to to to tons of Canadian

22:04 advisor that are saying what about that what about that we are

22:08 in the job of providing services if we can provide

22:12 a good service a good fee we will do it you know

22:14 that in the US we started with only five now you have like

22:17 35 different ETF in usage we started with three now we have six

22:22 and So we are we're in the job of helping advisor help their client.

22:26 So we're listening.

22:27 Yeah.

22:30 Yeah.

22:30 It sounds like it's a it's a pretty similar lineup to what's

22:32 in the US except stripping out Canada from the international component

22:36 which makes a ton of sense and then creating a can

22:38 a Canada specific equity product which similarly makes a ton of sense.

22:42 That's uh that's awesome.

22:44 Very very cool.

22:46 Thank you.

22:47 Now, you both talked about fees before and having to be competitive,

22:49 but how competitive will the fees be

22:51 with comparable products in in our Canadian marketplace?

22:56 Look, that's a great question.

22:59 You have the the the fees because some of the products

23:02 are alive and the other ones have already filed the registrations.

23:06 So, they slightly more expensive than the US products.

23:10 There is slightly higher cost here in Canada than in the US.

23:13 are slightly higher expenses, but like the Canadian equity and and Kathleen,

23:17 please correct me if I'm saying anything wrong.

23:19 You will have the numbers more in your head than me,

23:21 but if you think about the Canadian equity and the US equity,

23:25 I think at least 19 basis points management fee.

23:30 So the fees are very competitive in the US for example, US equity is 15.

23:35 So it's a slightly more they have a slightly higher cost

23:38 to the cost and other cost but I think that are very competitive.

23:43 um we we can give you the whole table

23:45 of all the expense ratios across all of them.

23:49 Um and we're always listening.

23:51 You know, at the end of the day, as I say,

23:53 we have to be sure that provide something that is interesting to clients.

23:58 And part of being interesting is having the right level of fees.

24:01 Now, Caitlyn, we we know what the management fees are.

24:04 We can see those in the perspective.

24:05 So, I think like all all the nerds that listen

24:07 to this podcast already know what the management fees are.

24:09 But something that I've seen come up as a as a concern

24:12 is that we don't know what the management expense ratio is yet,

24:15 which is going to include uh the OP cost uh the the operational

24:18 cost of the ETFs and the taxes and all that kind of stuff.

24:22 Do we have a sense or do you have a sense

24:23 of what the MERS are going to be for these funds?

24:27 Yeah, so we expect the MERS to be just management fee times taxes.

24:31 So times 1.13 um the operating t uh fees we are removing.

24:37 Um the other thing I would say on this um I in terms

24:42 of fees is we are trying to be incredibly competitive on fees and on pricing.

24:48 Um there could be if the ETF owns another ETF there could

24:52 be um the the me of that third party ETF um coming through.

24:58 If we own a CIBC ETF we will take that out

25:01 so it won't uh show up there in the me.

25:05 So where possible we'll try and use the CIBC ETF.

25:09 Wait wait wait possible.

25:11 No look you know you guys know me we use aantes and so but it's

25:20 it's very important what Cataline said and we do the same in United States.

25:24 Some people give you management fee and then you

25:26 have operating expenses and the operating expenses are floating.

25:29 So if the manager does a horrible job negotiating with the custodian Yeah.

25:34 the manager doesn't suffer,

25:36 the investor suffers.

25:38 That's that in the US we say that's a no no.

25:41 If I do a good job negotiating with a custodian

25:43 or a bad job negotiating with a custodian,

25:45 that should not really affect the life of the investor.

25:49 So I hope I do a good job because I get paid the reasonable amount of money,

25:54 but if I do a good job, bad on me.

25:56 I pay I get paid less.

25:58 And the investor is is is basically not exposed to that.

26:01 So I'm very glad that CIBC adopted the same philosophy.

26:06 Yeah, that's that's really good to hear because I know

26:08 in the rational reminder community where these products have been discussed,

26:11 there's been a lot of sort of uh wait and see because we don't

26:13 know what the mess are going to be and they could be a lot higher.

26:16 But the way that you guys described uh how you're approaching that I

26:19 think is going to be very reassuring to a lot of people.

26:22 Well, and just a reminder too that the me

26:25 won't be published until like after a year as well.

26:28 like it needs audited financial statements um before before being audited.

26:32 Yeah, that's exactly it.

26:33 So, people are aware of that and they're like, "Well,

26:35 let's wait and see what the ME ends up being after the first year." Um

26:39 but it I think you guys have probably

26:41 calmed a lot of people's nerves on that topic.

26:44 And Bart, you I mean, you said you're been around a long time.

26:48 I've been around a long time, too.

26:49 And this is, you know,

26:51 this whole fee discussion is such a refreshing time compared

26:54 to like when I started where there was low fee awareness,

26:58 but there used to be marketing fees that would

27:00 be five times what your total fee is.

27:03 Something like that.

27:03 It's just an amazing time for investor

27:05 these days to get you incredible affordable exposure.

27:10 Yeah.

27:10 I look, it's impressive.

27:11 I don't know what's happened.

27:13 I think a transparency for sure

27:14 and and and people awareness and then advisors that's going

27:18 out there and and being fidiciaries all that probably

27:21 created a huge push to people be more

27:25 transparent the moment that you're more transparent

27:26 and you know the fees are in your face

27:28 and you have to be more competitive and so that's great at the end of the day.

27:32 Yeah.

27:33 So Eduardo I've got to ask you you you created uh this term gas station sushi.

27:38 It became a very famous term at least with within our podcast community.

27:42 So, I've got to ask, will these ETFs be gas station sushi?

27:47 Look, why why why will I sell a gas station sushi?

27:53 You know, that term has become bigger than itself.

27:58 And so, it's impressive.

27:59 I I was reading in I think in the Wall Street Journal some politician speaking

28:04 and and he used the term stationation sushi

28:07 as a must be a Russian reminder person.

28:10 I don't know who that person is.

28:11 It was and was not speaking it was not speaking about investment.

28:14 It was speaking of something completely different.

28:17 And no no no no gas station sushi.

28:20 Don't worry man.

28:21 If we have gas station sue we we don't have a business.

28:26 Well one one one caveat.

28:29 One advisor stopped me once and said look there is a gas station.

28:33 I think it is in Pennsylvania where the this the the sushi.

28:38 I never been there but he claimed that.

28:40 So I believe him.

28:41 So maybe gas station sushi from every station but that one.

28:45 So you've been on tour in Canada, Eduardo.

28:47 Have you had any gas station sushi?

28:50 The food in Canada is amazing.

28:53 Look, I I was in Montreal and Montreal is well known for the amazing cuisine.

28:58 Toronto has also unbelievable cuisine.

29:00 There are things in Toronto that you

29:02 cannot find in LA and they're they're better.

29:04 I I was in Ottawa also have a plain meal.

29:07 In the past, I've been in Vancouver, you know,

29:09 Asian food and seafood in Vancouver and it's second to none.

29:12 I was in Dofino one.

29:13 I remember this little restaurant.

29:15 Oh my god, it was amazing.

29:17 I like to eat.

29:17 Let me be clear.

29:19 But but I was told other places that I haven't been.

29:21 For example, I haven't been ever in Kev City and I was told

29:23 that Kebec City is just has a couple of places that are unbelievable.

29:28 And we Winnipeg and Edmonton, the steaks supposedly are very good.

29:31 But you know, I for me stakes is hard

29:33 bar because I'm from Argentina and I like a steak.

29:37 And so but no, no, Canada has very good for the mind.

29:42 Yeah, I agree.

29:44 Eduardo, can you talk about the decision to launch

29:46 ETFs as opposed to mutual funds in Canada?

29:50 Yeah.

29:50 So the first thing that we always worry

29:52 when we launch a strategy is the strategy.

29:56 Do we like the strategy?

29:58 Is this a good strategy?

29:59 We don't want them then say that's cheap sushi.

30:02 No, we want to be sure the strategy is right.

30:04 Then we worry about the wrapper because inside the wrapper you can

30:07 put any kind of a strategy I can any strategy cabin wrapper.

30:11 So the first decision was to have the strategies

30:15 that we thought that were very good for Canadian.

30:18 So then we say okay we need to put it

30:19 in the shape and so we decided to launch at least first

30:24 in ETF and why is that so ETF I think about

30:28 ETF and mutual funds as ETF the vehicle of the future.

30:33 So I think a little bit about funds uh pay phones.

30:38 Ben doesn't know what a pay phone is because he's

30:40 too young but you camera and me we have used

30:43 plenty of those uh putting coins and so I think

30:46 a little bit about mutual funds as as a pay phone.

30:49 So if I had to go first on one thing,

30:51 I would go to think to to launch whatever I think that is

30:54 the the best vehicle in in that is available there and the ETF provides

31:01 a lot of protections for shareholders that I like in the mutual fund you

31:05 get blindsided with cash flows in ETF you never get blindsided by cash flows.

31:10 So I like that for fair and investor.

31:13 Now I'm not precluding having funds.

31:16 Look, we are a service and some people really need funds instead of ETF.

31:22 And so if if if the demand is there,

31:25 CIBC is more than willing to go and launch funds.

31:28 You know that in the US we have funds.

31:31 Uh we also have we have it and we have funds.

31:36 Now we launching CITs that is a different vehicle for retirement

31:39 funds in the United States are getting lot of pressures from mutual

31:42 from ETF on one side and CIT on the other if if

31:47 you see the the target funds for example you have seen net

31:51 outflows CIT tremendous employ that's telling you something the market is

31:56 deciding about that but there are some people that have a need

32:00 for funds and in Canada some people need need funds they will

32:04 tell us and work for we'll do we'll do the right thing.

32:07 Yeah, Kathleen, you you may want to speak about this from the CBC point of view.

32:12 No, we we completely agree.

32:13 So, we're listening if um there's a demand for mutual

32:17 funds like we're we're open to future launches as well.

32:21 So, this is just the beginning for us.

32:23 We started with eight uh and we'll we'll see uh what what the market wants.

32:30 I I did grow up with payoneses for the record.

32:32 My my first my first cell phone my parents bought me because I didn't have

32:36 quarters to call them from the pay phone and they finally decided that was okay.

32:40 They they were they got worried about me so they bought me my first cell phone.

32:43 But I uh I'm not I'm not that young.

32:45 Okay.

32:46 Okay.

32:47 Ben, I do want to just jump in here as well

32:49 on the the the fee conversation around uh mutual funds versus ETFs as well.

32:54 and just um like assure everybody that when

32:57 CIBC launches a an ETF with a an equivalent

33:01 mutual fund either like existing or um the other

33:04 way around launches a fund version of an ETF,

33:07 we price them both the same feebased.

33:09 So your fee based mutual fund is going to be priced the same as your ETF.

33:13 So there's no it wouldn't be us launching

33:15 mutual funds to make higher margins or anything.

33:18 It would be priced the same.

33:20 Yeah.

33:20 The same as we do in the US.

33:22 Look at that.

33:23 You see that's what I'm telling you.

33:24 Just start speaking with CIBC and and say, "Oh man,

33:27 these guys are thinking so similar to us." So very very proud of that.

33:32 Yeah.

33:34 Another question that I know came up

33:35 a lot when when the Rasher community started discussing

33:38 Avantis coming to Canada was who's actually going

33:40 to manage the implementation of these Canadian listed products?

33:44 Like what specifically is Avantis doing and what is CIBC doing?

33:49 Okay, the we can get a little bit technical.

33:52 The funds of the ETF are CIBC sponsor ETF but the manager is Avantis.

33:58 So the same portfolio manager that you

34:00 know are the portfolio manager managing this strategies.

34:05 Now in the case of ETF you have other functions capital markets for example.

34:12 So you have well in any fund you have a bunch

34:17 of other services like accounting cast all that is it's a CIBC

34:22 and can speak about that but the portfolio manager the guys

34:27 making decision they might deciding the trades even the guys trading are guys.

34:36 Yeah.

34:36 So, so from CIBC's perspective, like we're responsible for like the ETF itself

34:41 in the sense that we're doing the reporting, the operational um the controls,

34:46 continuous monitoring,

34:48 making sure that we are staying within Canadian regulatory guidelines,

34:52 um again like the capital markets, um reconciliation, like all of all of that.

35:00 Okay, that's good to hear.

35:01 And here's another question I know the nerds want asked.

35:05 Will the Canadian listed funds hold

35:06 the securities directly or hold US listed ETFs?

35:11 No, no, no.

35:11 We look whenever we do something,

35:13 we are always thinking about what's the right thing

35:15 for investor because if you don't do the right thing,

35:17 you're not going to grow them.

35:18 No one will buy them.

35:19 And so this ETF hold the securities directly with one exception.

35:23 So we're buying securities in in the US, in Canada.

35:26 We're going to be buying securities in emer market when it's up and everything

35:30 with one exception.

35:31 What's exception?

35:32 The fun of funds cage.

35:34 So the global equities that's a fun of funds buy the other Canadianbased ETF.

35:39 We're not buying US based ETF here at all.

35:42 This is is when I mentioned before these strategies are what you

35:46 have seen in the US translated to Canada with with some exceptions.

35:50 We have exceptions because we need to separate Canada from Eye and what not.

35:54 That's what I meant is we're buying

35:56 the the same approach to buy the underlying security.

36:00 Now the final funds is different.

36:02 cash is different because it's an asset allocation fund.

36:05 It buys the other ETFs.

36:07 Yeah, it buys the other other ETFs,

36:09 but because the other ETFs hold securities directly,

36:11 the tax efficiency of buying the Canadian listed ETFs is is great.

36:14 Like it's been it's less common now, but for many years,

36:17 it was very common for emerging markets products,

36:20 for example, to have a Canadian listed ETF that just held the US listed ETF.

36:24 But as you guys know,

36:25 that comes with some potentially meaningful tax inefficiency.

36:29 Look, look, I know that we're speaking about Canada, but look at usage.

36:32 In uses, when we launch the usage,

36:34 we have our emerging markets usage and buy securities.

36:39 It goes out there and buy securities and and the one here will be the same.

36:42 And in uses, we have a small value and buy securities.

36:45 It's the same approach.

36:47 We do slightly different in in Australia

36:50 for some very good reasons for Australian investors but but I think that is

36:55 more advantageous for Australian investor structure

36:58 that we have that buying securities but for for the rest of the markets

37:03 we always try to do whatever we think that is the best for the investor.

37:07 Yeah that's great.

37:08 Uh one of the products that I'm most excited about is

37:10 the the all equity asset allocation ETF that you mentioned the fund of funds.

37:14 Can you talk about how aggressive the factor tilts

37:16 will be in that fund relative to market cap weights?

37:20 Yeah.

37:20 Yeah.

37:20 So, so let's let's let me describe more

37:24 or less what the gaset allocation will be.

37:27 So, that fun of funds is is going to have is is coming next week.

37:30 So, it's 30% in Canadian equities and what is going to buy?

37:35 CIC.

37:36 Yeah.

37:37 and and then the the rest is basically

37:41 market up weights for the rest of the market.

37:44 So the US comes around 40% e and emerging markets a little bit less

37:49 and then on top of that has an 8% allocation to a global small value.

37:55 So the tilt is a tilt of our core like

37:59 strategies with an extra tilt to to a small value

38:05 that allows us to provide in our opinion significant value added

38:10 and and and the most interesting thing is how we're tilting.

38:14 We are not tilting.

38:15 You can tilt in different ways.

38:16 If I tilt over things that don't have high respect returns,

38:20 I increase in tracking error and increase in cost for no benefit.

38:23 So if I tilt towards cheap sushi, yeah, you pay more,

38:27 you have all these things, but you don't have the benefits.

38:30 So you have the tracking error, you have the extra rates,

38:33 but you don't have the benefits in a spectrum.

38:35 So the way we're tilting is this really efficient way

38:38 in order to increase spect while we increasing tracking error,

38:43 but very efficiently, not as much as we are tilting.

38:48 Yeah.

38:48 Yeah.

38:48 We do have some questions about tracking air too,

38:49 but ju just on the geographic allocations.

38:51 So you mentioned that they're going to follow market cap weights.

38:54 Is that market cap weights as of outside?

38:58 Right.

38:58 Right.

38:59 Right.

39:01 30%.

39:01 Yeah.

39:01 Yeah.

39:01 Yeah.

39:01 So excluding Canada, are those market cap weights as of today or is

39:05 it going to consistently follow market cap weights over time?

39:09 Follow.

39:10 Okay.

39:10 Follow.

39:10 Okay.

39:10 Yeah, that's that's good.

39:12 Follow you.

39:12 You cannot you unless you have a reason

39:14 to have a some kind of fixed light weight there

39:20 is no no nothing that tell you let's let's

39:23 not float and so the idea is floating you know

39:28 even if you have a fixed weight Canada

39:30 let's suppose that tomorrow Canada becomes the largest

39:32 market in the world 30% may be underweight in Canada at that point so you

39:36 say hey we cannot have 30% we may have to go have 50 so even

39:39 when you s weight you have to keep an eye But you can be more fixed.

39:43 The rest you're better off floating in.

39:45 Yeah, I like the floating.

39:46 When you look across the asset allocation ETFs that are available in Canada,

39:50 some of them are floating market cap weights and some of them are fixed weights.

39:53 But I I like what you guys are

39:54 doing with the with the floating market cap weights.

39:57 Thank you.

39:59 So I'm curious, Eduardo,

40:00 how much outperformance and tracking error is it reasonable to expect

40:06 from Cage relative to a market cap weighted but geographically matched ETF?

40:13 That's a great question.

40:14 So it's good that you say it's ge geographically matched because if not

40:17 you have a lot of tracking error even for the same you know.

40:21 So that's that's good.

40:22 So we think the value added will be 1.5 to 2 2%.

40:28 Uh the tracking error is around 3 4%.

40:35 Um so I give you ranges.

40:38 I can give you a specific number if you

40:40 compute this but ranges is better because you know

40:42 this is not exact science and then market move

40:45 and you cover but 150 and 200 basis points a year.

40:49 You know that we have been managing these strategies.

40:52 We have been managing Canadian equities inside our USF.

40:56 We have been managing.

40:57 We have been managing US.

40:58 We have managing both.

41:00 So we have a pretty good idea how this will behave.

41:03 We put it together for the last you know we

41:07 have six and a half year track record in those.

41:10 So we have a pretty good idea how

41:11 that would behave and then these numbers are reasonable.

41:16 Yeah.

41:16 Tilt tilts in Canada in general have been pretty pretty nice in recent history.

41:21 Yep.

41:21 Yep.

41:21 Yep.

41:23 Um Kaitlin Avantis in in in the US publishes a a monthly

41:27 ETF field guide that has the the equity composition of each fund.

41:31 And I I know that our listeners find that really really useful

41:34 just to see what's going on under the hood with these ETFs.

41:37 Will Avantis or CIBC be publishing something

41:39 like that for these Canadian listed ETFs?

41:42 So this question keeps coming up.

41:44 Um so we definitely understand like the value of this piece.

41:47 Um and we are doing our very best to take all the pieces um that Avantis

41:54 has uh as collateral and Canadianize them um

41:58 but also work within Canadian regulators um as well.

42:02 So there are some restrictions um in terms

42:05 of reporting especially while we're in the first year.

42:08 So um those are just considerations that we are making

42:11 but um the the bones will be there for sure.

42:15 I I thought and more to come.

42:17 I have I have a meeting this morning with an advisor

42:19 here in Toronto and that certainly was brought up

42:24 and he also wanted to have access to the podcast

42:28 by HAL I know you know HAL very well and you event

42:32 too because you have him here and so say can

42:35 I have access to the HAL podcast anyone can can have

42:38 access because it's in in Apple in the Apple store

42:41 and certainly we do webinars with those guys Hal Mayor Stadman,

42:47 all our other people.

42:49 Look, we're here to help advisors.

42:51 If we can help advisors, the end investor is better off.

42:56 And if doesn't need help, that's okay.

42:58 But but it must say these guys can help me bring in this field

43:01 guy or or bring in behavioral finance experts or any other kind of experts.

43:07 We are here to help.

43:08 And CIBC is is is very focused on that.

43:13 Yeah, that's awesome.

43:14 Yeah, I like what you what you guys

43:15 and Hal are doing with that uh with that podcast.

43:17 We have had Hal I think Hal's been on this podcast three times.

43:21 Is that right, Cameron?

43:22 That's right.

43:22 Uh and I was actually on your podcast once Edardo with I was guest.

43:26 I know.

43:27 I know.

43:28 I know.

43:28 I know.

43:29 And and and Khalis Khal is great.

43:32 Mayor Mayor is amazing.

43:33 So advisor that we we speak today is a big follower of mayor also.

43:38 And so I said, "Look,

43:40 I'm I'm going to try to get a couple of books signed by Mar

43:43 and send them over because he he knows all the books." And so I said,

43:46 "Okay, maybe I can do that." I I think it's important as well for us

43:51 to make the distinction that um in Canada there are some

43:54 rules with like what we can brand for advisor use

43:57 versus what we can brand for investor end use as well.

44:01 So, our goal is to be transparent um and honest and open in our communication,

44:06 but then also to make sure that we're

44:08 meeting the investor where they are, who they are.

44:11 Um so, you may see similar pieces,

44:13 but they're directed at different audiences from our perspective as well.

44:18 Makes sense.

44:20 Just for clarity, that's Hal Hersfield that we've been talking about and yeah,

44:23 he's been a guest a number of times and is

44:25 a good friend as mayor was also a guest.

44:28 Great interview.

44:29 Yeah.

44:30 Uh so Eduardo CAC the Canadian equity offering

44:33 is quite unique in the Canadian ETF market.

44:37 Can you share how its average characteristics compare with the TSX index?

44:42 Of course.

44:43 So basically rel relative to the Canadian

44:47 market is is is shifting weight from companies

44:51 that have bad profitability and very high

44:54 price price relative to the adjustable value.

44:56 So if a company has high low discount

44:59 rates emitted in the price a company with low

45:02 profitability and high price high relative price related

45:05 to the the adjusted value that company has lower expected.

45:09 So we're going to underway that comp those companies in large caps and big caps.

45:13 In small caps we may completely those companies because it doesn't produce too

45:17 much track and error and and really has hor they have horrible returns.

45:21 So underweighting companies with lower expect returns and that is

45:24 going to be so that is being shifted

45:26 towards companies that have higher profitability higher adjusted divided

45:32 by price or low price despite the high profitability.

45:36 What is an indication of higher expected returns and that overweight

45:40 is higher in mid and small cap companies where

45:43 the premiums are higher because the valuations have more dispersion

45:47 and so similar what you have in in in a USB

45:51 NB in United States the strategy is basically the same

45:55 just underweight companies with low expect returns because that you

45:59 identify with the low profitability and and and the very

46:03 low book to price and over overweight companies will high profitability,

46:08 high book price in particular in in small

46:11 and midcaps where the premiums are much much higher.

46:15 Um it's it's unique is the amount of shift

46:20 that you you have is around 15% underweight and 15% overweight.

46:26 The shift from reds to green and most

46:28 of your audience know what I mean red to green.

46:31 Reds is a company that have low profitability,

46:34 low book to market and greens high profitability, high book to market.

46:37 The shift is underweight.

46:39 The reds around 15% and overweight

46:41 the company with higher expected return by 15%.

46:46 So it's still tracking error sensitive you know it's hard to think

46:50 about two and a half 3% tracking error but but you

46:54 have good value added and that's what you have seen

46:57 in in in all our core like strategies in the US.

47:02 Yeah, it's so good and it really is a unique product in Canada.

47:04 That's uh when we did our model portfolios back

47:07 in 2019 when we used your your US listed ETFs.

47:12 We were trying to give our listeners

47:14 because people are listening to this podcast hearing

47:15 us talk about factor investing but they had

47:17 no way to implement it in their portfolio.

47:19 So we did our models back in 2019 to give them an approximation of what we do.

47:25 But we had no option for a factor tilted Canadian equity ETF.

47:29 And still to this day, there's not there's really not a whole lot.

47:32 No, no, no.

47:33 Did they say yes?

47:34 Well, CAC is live.

47:36 CAC is other than CAC.

47:39 But yeah, you're you're really the only game in town

47:41 for a high quality factor tilted Canadian equity ETFs.

47:44 It's a very very cool development for the Canadian market.

47:48 Thank you.

47:50 Uh h how is turnover and just noting that there are

47:54 potentially differences in in the the structures in Canada and the US.

47:58 How will turnover in the funds

47:59 be managed to minimize capital gains distributions?

48:03 That's a good question.

48:04 So all our strategies have very low turnover.

48:08 So we we we work on valuations at the end of the day.

48:13 So you have low turnover and we're very cognizant of of cost.

48:18 So let's suppose that you say I'm going to and this is an example.

48:21 If I'm going to pick up one basis point of excess expected return,

48:25 I'm not going to spend five basis points

48:27 in in trading cost that's just kind of done.

48:31 So immediately when you are thinking in valuations

48:33 and you're taking into account trading cost and all

48:37 kind of implementation cost beyond trading you say

48:40 okay your turnover is going to be low.

48:43 So the more the most aggressive strategy for turnover for us

48:47 probably small value tend to have around 25% turnover a year.

48:51 So it's a relatively low turnover.

48:53 If you think about that 25% turnover a year is around

48:56 10 basis points a day of turnover is 250 trading a year.

49:00 So it's a very small number.

49:02 If you look for the core like a strategies that's even lower you know way lower.

49:09 So the amount of trading that you need to do to keep

49:13 the strategies pure to to their objectives is not too much.

49:17 That's a huge advantage whenever you're dealing with taxes.

49:21 Huge advantage and in particular when you

49:24 have cash flows because when you have cash

49:25 flows you can fill the gaps with the cash flows in the grow growing strategy.

49:31 You say well this security I bought move away now I have another one to buy.

49:36 You have a cash flows you don't have to raise magnitude.

49:38 So um considering cash flows uh considering the low turnover we think

49:46 that we have have something that is

49:48 very very interesting even for taxual investors.

49:51 Um so it's it's it's important to take all this into account.

49:57 I'm not of a big fan of a strategy with high turnover.

50:00 Someone may have an amazing strategy with high and that's fine.

50:03 I'm not going but we we don't do those things.

50:08 Caitlyn, roughly how much AUM do you think one of these Canadian

50:13 ETFs needs to remain open and viable in the long run?

50:17 So, we're super committed to this suite.

50:20 Um, if we weren't and we were just testing the waters,

50:23 we would have launched one or two, but we launched a suite of eight um,

50:27 including net new uh, products that aren't available anywhere else.

50:31 So, we don't have a a dollar amount, but we we are committed.

50:34 We know that these are going to be successful.

50:36 So, we don't have a dollar amount because we're not worried about it.

50:39 Um, if that makes sense.

50:41 Maybe a little we're confident, but we're we've seen the success, right?

50:45 And Avantis does what they say.

50:47 Um, they've had consistent returns.

50:49 They the process works and we're we're confident that, you know,

50:53 Canadian investors are looking for a way to invest

50:56 more tax efficiently in the in this suite.

50:59 So look when this this question is a very valid question because when

51:05 we launched our ETF in the United States and you guys may

51:09 remember it's end of September 2019 we were getting that question we

51:15 were getting that question every day and on top of that competi

51:19 competitor were saying oh they have no money they will shut

51:22 down tomorrow and so not only we are getting the question because

51:24 of valid concerns as a fidiciary you have also because they were

51:28 being paid by by information that was create trying to create more uncertainty.

51:33 And you see the story, you know, we have good products, we have good service,

51:38 we have low fees, and we think that people out there are clever.

51:42 If we get something that is good, a good price and good fe,

51:45 we will service those guys out there that are clever,

51:49 they will take advantage and and that's what we want

51:51 them to do to take advantage and and and and use

51:54 this as much as they can if that's good for them and we think that it is.

51:58 So we're very confident.

52:02 Eduardo, just thinking more more generally about Avantis,

52:05 you were last on in 2024.

52:07 Have there been any enhancements to the Avantis approach

52:10 to portfolio implementation since the last time we talked?

52:13 Yeah, we can speak about a couple of things that we touch here and there.

52:17 I always think about enhancement saying in in when

52:20 sometimes we speak with with some people and that's not you by the way that says

52:26 they want you to make a change every quarter.

52:28 Yeah.

52:29 And and and it's it's common some some kind

52:32 of consultants want you to make a change every quarter.

52:34 If you make a change every quarter means that the last quarter something

52:37 was wrong because there is if things were right why you want to change

52:41 every quarter and the beauty of what we have done is is it

52:44 was thought very well from day one and so the power to make changes

52:48 is very very hard it still is not perfect I'm never going to claim

52:52 that we're perfect even we make aund more changes because we discover the new

52:56 empower is it's not going to be perfect perfection is not achievable you

53:00 want to strive to get there and so but but the body is high.

53:05 So we have made some tweaks in our momentum filters.

53:08 We have touched in in couple of markets because of accounting rules.

53:12 We have changed our measure of profitability.

53:14 But most of the things are similar.

53:17 The tweaks and momentum some have have happened

53:20 and some more will happen that already planned.

53:25 But the biggest biggest thing out there that we but that we

53:30 know that needs work because perfection is not there is

53:34 is the measure of profitability because you know that we using

53:37 last 12 months to to but who we need is future.

53:42 We don't care how much money the company's going to make in the future

53:45 and and using the measures that we have

53:47 have information about the future and future returns.

53:50 But if you tell me how to predict the future better,

53:54 you know, that's why perfection is not achievable.

53:57 We never do perfect.

53:58 But maybe there are ways to to have a better proxy for future profitability.

54:04 And that's something that we're always looking.

54:05 Maybe there is information that is available now.

54:08 Maybe it's information that may not available now,

54:10 but may be available in the future.

54:12 And so we're always looking and trying.

54:14 Um, we have played with certain things.

54:17 Some things were very promising.

54:18 uh and then you test them enough that say okay it's

54:21 not working but we have a hope we think that we're

54:26 always testing new things and we think there's a couple of things

54:29 that may work but look and we not be surprised if

54:32 we say later it doesn't work that's a horrible life

54:36 of a researcher a researcher is full of hope and full of frustration

54:42 and it's a horrible life for the researcher you're you say

54:46 oh man I'm excited this is great and then boom Boom.

54:48 Someone just punch you down and say, "Oh,

54:50 it doesn't work." And it's you have to have nerves of steel,

54:54 you know, and and perseverance like no other.

54:59 So So what's the most hopeful research that you're looking at implementing now?

55:04 That well implementing now.

55:06 We have some a couple of things momentum that we're doing,

55:08 but the most hopeful research is trying to be able

55:11 to have a better prediction of profitability in the future.

55:14 Profitability growth if you want to think about.

55:17 So we are we are quite good at break the level but the derivatives

55:22 of the level the variations of the level is there anything that gives us hint

55:26 on indication and we have something that we tested a lot but but still

55:34 I'm not I don't think that is producing the the benefit that we should see.

55:39 So there is something that is not working but someration likes.

55:44 Yeah.

55:44 Yeah.

55:44 It's interesting.

55:45 I I I do have one more question about uh CAG.

55:48 Uh so we talked about the geographic allocations.

55:52 How are the factor tilts decided?

55:53 Like and then the the sort of thought behind the question

55:57 is will the factor tilts change over time for any reason?

56:04 We don't

56:05 okay the this is a portfolio that is more tilting than the core strategy.

56:10 So you look at the our ade in the US ABM and AB US here is is

56:19 C CIC that is the Canadian equities CA US the US equity C the E CM the measure

56:29 markets so it's those tilts plus an extra one

56:33 towards global small value and value defined as not

56:36 cheap sushi our way of doing it and So um we have has quite a lot of tilt.

56:45 I'm not telling you that that's a perfect amount of tilt.

56:47 There is no perfect.

56:48 There is a restorance for investors or someone want more someone

56:52 less for personal reasons or or or disable reasons or what not.

56:57 So we feel comfortable with that.

56:59 It may come the case that you know there is a set of investor that want

57:03 way less and way more and so we have two set of clientele and if

57:08 that's the case we may have to have more than one and and here we

57:11 are we're listening uh we're listening remember I

57:15 always say we are in the service business

57:18 and so if I provide a service and no one is interesting

57:21 I don't have a service so if there are one set of clientele

57:25 and all the same okay I have a service if there are two

57:28 set of clientele and I want to serve is both may need two things.

57:31 So we're listening we're listening to people.

57:33 We know for example that we will have to have balances strategies.

57:36 We know that.

57:37 Now the question is what kind of balance strate what's what's how much fixed

57:42 income and equity because I cannot have

57:44 10 balances strategy doesn't make any sense.

57:46 So what what do I need?

57:49 Yeah makes sense.

57:50 Okay.

57:51 I can tell you guys are both excited about about this this launch.

57:54 Uh I would love to hear from each of you.

57:56 What are you most excited about?

57:59 Who was first, Kathleen?

58:02 Um, I guess I'll go first.

58:04 Um, I am super excited about emerging markets to be honest.

58:07 Um, I think that the alpha that it's driven in the US,

58:11 the fact that it is the largest

58:13 actively managed emerging market ETF in the world.

58:17 Um, and we're bringing a Canadian version that holds the underlying directly.

58:21 Again, Ben, like you mentioned,

58:23 there are quite a few EM ETFs in Canada that still wrap a USlisted.

58:29 Um, again, two layers of withholding tax there.

58:32 And I think that this is an incredibly differentiated strategy

58:36 in an incredibly tricky market to navigate uh for investors.

58:44 I'm I'm I'm a little bit older than Kathine, as you can notice.

58:47 And I have three kids.

58:49 And if someone ask me which one of your kids you like.

58:52 I like all of them for different reasons and and I really like them a lot.

58:56 So it's a quite a strategy.

58:59 I love I love all of them.

59:01 If not we were not going to have them.

59:03 I think each strategy that we launch have a purpose and all of them

59:07 together help an advisor achieve an asset

59:09 allocation like CG is an asset allocation.

59:13 All equities later will have balance but is it it serves an asset

59:17 allocation that in our opinion is much better than just a market cap waiting

59:21 index that doesn't consider respect return

59:23 the higher the price the higher the weight

59:25 we can provide something that is more meaningful for advisors and for the know

59:29 the investor that is knowledgeable know and and can deal with tracking

59:34 error and whatn not so I'm very excited to be able to bring

59:39 that to Canada you mentioned before that I was telling you oh yeah

59:42 we love to be in Canada but I don't know if we are going

59:44 to be able to do at the regional fee and for not able

59:46 to do a regional fee we're not going to do it because doing

59:49 a bad job is not a good idea for anyone and so I'm

59:53 very very excited to be back in Canada I have great experience in Canada

59:57 the beauty one of the beauties things of Canada is that um people

1:00:02 speak different languages you know French and so I never feel like I'm

1:00:06 the guy that have the accent there many people that have an accent no

1:00:09 matter what language you are so I'm one more of the crowd And so,

1:00:14 no, I really enjoy being in Canada and it's

1:00:17 a it's a pleasure interacting with Canadian advisors and I'm

1:00:22 really really excited to be back here with something

1:00:24 that hopefully is of great use to all the investors.

1:00:29 Yeah, that's awesome.

1:00:30 Ben and Cameron, I'd love to hear what you're most excited about, too.

1:00:34 So, I think Canadians have really embraced the asset allocation ETFs.

1:00:39 Uh, and and there's even subreddits.

1:00:41 There's almost these like like cult followings of specific tickers.

1:00:44 Like there's a subreddit called Just Buy Xeqt.

1:00:48 I think there's another one called Just BuyVEQT,

1:00:50 which are all equity tickers from Vanguard and Black Rockck.

1:00:53 So, I think CAGE is a really,

1:00:56 really exciting addition to the Canadian market where when I'm

1:01:00 talking about how PWL invests and how I think about investing,

1:01:03 uh, I can point people to a single ETF just

1:01:06 like they could with a with a market cap weighted uh,

1:01:09 globally diversified equity asset allocation ETF.

1:01:11 So, I I I'm really excited about that.

1:01:14 Uh, and I I do think it's going to have a big impact on the Canadian market.

1:01:17 I know the people that listen to our podcast

1:01:19 are going to be super excited because historically,

1:01:22 if they wanted to invest like we do,

1:01:25 but doing it themselves, they had to do this kind of complicated thing,

1:01:28 mashing up US listed and Canadian ETFs.

1:01:30 They had to hold multiple ETFs.

1:01:32 They had to do currency conversion themselves.

1:01:34 So, all that goes away with a product like CAG.

1:01:37 Uh, so that's by far what I'm most excited about.

1:01:40 Yeah.

1:01:41 And I look at the big arc of the industry.

1:01:42 I think it's great that we're making such great progress on, as I said earlier,

1:01:46 lower cost, very effective, efficient, targeted,

1:01:51 intelligent tools that actually capture some of the research

1:01:55 that's been going on, as we all know,

1:01:57 for 60 plus years in this space of financial economics.

1:02:00 So, I think that's all great for the Canadian public.

1:02:04 And to have it coming from a bank, I think that's also good progress.

1:02:07 So, that that's what makes me excited about this this evolution.

1:02:11 And the evolution continues, right?

1:02:12 I think Canada's historically been slower in this evolution

1:02:17 and it's nice to see some change.

1:02:21 Love it.

1:02:21 I love it.

1:02:22 Hey, one one thing for you, Ben, on camera.

1:02:25 Next time that you have one of these events, I want to show up.

1:02:29 You guys have been so great and your listeners so great,

1:02:32 not only in the US, also in Europe and and Canada.

1:02:36 I want to go.

1:02:37 I want to have a beer with all of them.

1:02:39 So, We we were we were going to do a bunch of meetups this year.

1:02:44 Was the original plan, but we decided not to do any, I don't think.

1:02:47 Hey, Cameron.

1:02:48 Because it was just we've just been so busy.

1:02:50 Um, but next time we do a meetup, we will absolutely invite you.

1:02:53 It'll make a it'll make a big splash.

1:02:55 Lots of people will want to come to that.

1:02:57 We can do we can do one in LA.

1:02:58 Everyone comes to LA, man.

1:03:01 January January February in LA, man.

1:03:03 What else?

1:03:05 So, okay.

1:03:06 I like it.

1:03:06 Awesome.

1:03:07 Thank you guys.

1:03:08 Yeah.

1:03:08 Thank you guys.

1:03:09 really appreciate the podcast.

1:03:11 Thanks.

1:03:11 Thanks guys.

1:03:16 Hey everyone, it's producer Matt.

1:03:18 Thank you so much for tuning in to this week's episode.

1:03:21 Before we sign off, here's the disclaimer you've been waiting for.

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