Live chat with First Asset CEO Barry Gordon
exchange traded funds barry goldon etfs
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Good morning and welcome to this live chat with Barry Gordon, CEO of First Asset Investment Management. I’m Darcy Keith, web editor with Globe Investor. Today we’re talking ETFs: how to put together a low-cost but profitable portfolio, new ETF products that are worth checking out, the benefits of ETFs over stocks and mutual funds, and other things investors should know about these products. -

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One of your new products is the XTF Canadian dividend ETF, which tracks 30 dividend-paying stocks and yields 5.6 per cent. That seems to be a pretty solid yield compared to other dividend ETF products out there. How do you achieve that and how do you see returns evolving for that product. -

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The Morningstar CPMS methodology screens for stocks which have strong cashflows relative to debt, a strong history of maintaining and increasing dividends, as well as other value based screens. It does not "yield hunt" in order to generate a higher yield. It's based on strong fundamentals. -

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There are Quebec based pension funds that have a Quebec centric benchmark as part of their focus, so creating an etf for them to use helps them minimize their own tracking error to their benchmarks. Plus, it gives retail investors in Quebec the opportunity to invest "in their own backyard" -

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The Morningstar CPMS screens use both backward looking traditional value metrics as well as proprietary forward looking metrics like "expected dividend yield", which helps differentiate. The key is that we are trying to replicate indexes that deliver better risk adjusted returns -

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But all the XTF Morningstar ETFs can be used as core holdings for both Canadian and US equity exposure. For something a little different, I suggest people also look at our covered call ETFs which again strive for the core equity exposure but strong risk adjusted profile -

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Thanks Roy. Again without knowing your particular circumstances it is very difficult to give advice. If you are looking for shelter from volatility, there are several choices, including specific low volatility etfs from Powershares and the different covered call etfs offered by us, BMO and Horizons..... -
I always struggle when people ask for a parking place. If you are looking to eliminate equity or fixed income market exposure, a good place is cash! If you still want exposure to the equity markets but want to mitigate some of the volatility, our covered call ETFs might be a good choice. -
Hi Barry -several times I was about to purchase some ETFs from XTF but your ETFs trade with some thin volumes and bigger spreads. I know ETF's NAV is based on underlying stocks value, but am still concerned about later when I exit the position. Wouldn't exiting be difficult? -

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the spreads should never be wider than 3 or 4 cents. The market maker is there in size (10-30K shares) on either side so you should never have a problem exiting a position. It is always a challenge with new ETFs. To a certain extent, you need to trust the people you're dealing with. Call us and we can help out. Further to that, we monitor the spreads constantly and try to ensure they are one or two cents in normal markets -

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We write the calls monthly, at the money, on each holding. There is no discretion in terms of how much we write. We can choose to write longer than 30 days, but rarely do so. We focus on the most liquid, efficient part of the market, which is short dated ATM options...... -

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I don't want to be overly complex, so the easiest way for a person to test liquidity is to look at the underlying stocks or bonds. Are they liquid? If so, the ETF could transact in huge volume at the click of a button. A new ETF could have traded no shares all day, then at 3:30 print a buy for 500K shares, because of the ability to execute the necessary buy/sells in the underliny at the same time. Hope that makes sense -

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