The ETF Lab
ETF Spotlight: Asset Allocation ETFs
Why is asset allocation important?
Studies have shown that asset allocation can account for up to 92% of the variation in a portfolio’s returns[1]. Consequently, Mackenzie’s asset allocation ETFs have been professionally designed to provide effective asset allocation in a single solution.
Mackenzie asset allocation ETFs
Mackenzie Investments’ offers three asset allocation ETFs (MCON, MBAL and MGRW) that are tailored to your clients’ risk tolerance.
Since inception, Mackenzie’s asset allocation ETFs have posted competitive relative returns:
How do Mackenzie’s ETFs differ from other asset allocation ETFs?
- Annual management fee of just 0.17%
- Adjusting for Canadian home bias: Mackenzie asset allocation ETFs are the only asset allocation suite that provides exposure to both Canadian domiciled developed ex North America and emerging market local currency bonds.
- Diversification benefits: These unique asset classes can potentially help enhance diversification due to modest to negative correlation with Canadian equity and fixed income.
- Potential tax efficiency: All underlying ETFs within Mackenzie’s asset allocation ETFs are Canadian listed and obtain direct exposure to the underlying securities. For more information on potential tax inefficiencies for Canadians investing in ETFs that wrap US listed ETFs, read more here.
How advisors can use these ETFs in client portfolios:
- Help build a cost-effective core: these ETFs provide investors cost-effective exposure to thousands of underlying holdings.
- Cash equitization: help reduce cash drag in your clients’ portfolios by drawing on the intraday liquidity offered by asset allocation ETFs.
- Simplify rebalancing: these ETFs are rebalanced regularly to maintain target exposures and risk levels.
- All-in-one solution: the Mackenzie suite of asset allocation ETFs provides embedded discipline and manages for operational complexity in executing an effective asset allocation strategy.
Tax loss harvesting opportunities:
As we also explored in our last two editions of The ETF Lab (links below), the YTD drawdown across equity and fixed income markets may provide a significant tax loss harvesting opportunity.
The ETF Lab: Equity tax loss harvesting ideas for 2022 | Mackenzie Investments
The ETF Lab: Tax loss harvesting ideas for 2022 | Mackenzie Investments
As one example, see below the potential tax savings on rotating out of VBAL – (Vanguard Balanced ETF Portfolio) into MBAL – (Mackenzie Balanced Allocation ETF).
YTD and 1 YR price returns for asset allocation ETFs shown below:
Further Resources:
- CE accredited presentation on Asset Allocation ETFs by Naseem Husain, VP ETF Strategist
- Mackenzie Asset Allocation ETFs
- Mackenzie's Asset Allocation ETFs - YouTube – full analysis of the suite from Justin Bender of PWL Capital Inc. and author of the CPM blog.
ETF News & Notes
An all-in-one fixed income solution for a more attractive yield environment
MGAB – (Mackenzie Global Fixed Income Allocation ETF) is a 100% fixed income asset allocation ETF that combines the benefits of broad fixed income diversification with strategic asset allocation.
With a low management fee of 25 bps, MGAB provides active asset allocation, along with exposure to eleven different fixed income asset classes (including floating rate loans, US TIPS, and Canadian/ US aggregate fixed income).
MGAB currently has a w.a. yield to maturity of 4.57%, offering a much more attractive yield buffer than just 10 months ago.
Bonds with a biodiversity bonus
Konstantin Boehmer, Mackenzie Investment’s Co-Head of Fixed Income, shared a piece describing the unique structure of a bond that has been nicknamed ‘The Rhino Bond’. Konstantin describes how it’s rare to find opportunities which appear “dually undervalued and impactful”. Read the full piece here: More Rhinos for this World | LinkedIn
Mackenzie Investments offers MGSB - (Mackenzie Global Sustainable Bond ETF), which combines multiple sustainable investing strategies to try to achieve the most attractive risk-adjusted returns while also delivering impact.
To learn more about sustainable bonds watch this video where Konstantin briefly explains the space and how it compares to traditional bonds.
Historical look at bull and bear markets
The average US bull market has lasted much longer and has produced much stronger returns than the average bear market.
Year-end reinvested distributions estimates (capital gains)
We announced our estimated year-end reinvested distributions (capital gains) for our ETFs here.
As a reminder, these are only estimates and are expected to change as we approach year-end. We expect to announce the final year-end reinvested distribution amount for all ETFs towards the end of December.
ETF Flows Update
- QEBL – (Mackenzie Emerging Markets Local Currency Bond Index ETF) led fixed income ETF flows in Canada for the week with inflows of $115M.
- Canadian equities led inflows on the equity side, with XIU – iShares S&P/TSX 60 Index ETF attracting total inflows of $1.6B.
- While money market ETFs continue to pull in assets, we have seen core Canadian fixed income ETFs begin to attract assets in recent weeks. Fixed income ETFs overall attracted $276M last week alone.
This Week’s Read
Mackenzie ETF Top Performers
[1] Source: Brinson, Hood, and Brian D. Singer, 2012
[2] Source: Bloomberg, Mackenzie Investments; as of November 18, 2022
FOR ADVISOR USE ONLY. No portion of this communication may be reproduced or distributed to the public as it does not comply with investor sales communication rules. Mackenzie disclaims any responsibility for any advisor sharing this with investors. Commissions, brokerage fees, management fees, and expenses all may be associated with ETF investments. Please read the prospectus before investing. The indicated rate[s] of return are the historical annual compounded total returns as of November 18, 2022 including in share or unit value and reinvestment of distributions and does not take into account sales, redemption, distribution, or optional charges or income taxes payable by any securityholder that would have reduced returns. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated.
This document may contain forward-looking information which reflect our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of November 18, 2022. There should be no expectation that such information will in all circumstances be updated, supplemented, or revised whether as a result of new information, changing circumstances, future events or otherwise.
The content of this article (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it. Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in the investment products that seek to track an index. The rate of return is used only to illustrate the effects of the compound growth rate and is not intended to reflect future values of the investment fund or asset allocation service or returns on investment in the investment fund or from the use of the asset allocation service. Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in the investment products that seek to track an index.