Global X Funds, the New York-based firm known for its niche strategies, launched its second exchange-traded fund focused on Canada in two month, this one a portfolio of preferred stocks that carves up a space dominated by the iShares MSCI Canada ETF (NYSEArca:EWC).
The Global X Canada Preferred ETF (NYSEArca:CNPF) , the first of its kind, tracks the Solactive Canada Preferred Index, a benchmark of 58 Canadian preferred stocks that trade on the Toronto Stock Exchange. Its annual expense ratio is 0.58 percent.
Preferred stocks are considered equities, but are much like bonds in that they have a par value at the time of issuance and holders receive dividends based on a percentage of par value. While preferred holders received dividends before common shareholders, they typically don't have voting rights as common holders do.
The fund is heavily focused on financials, with that sector representing more than 73 percent of the portfolio. Just over 10 percent is tied to energy names, 6 percent to telecommunication services, and the remainder is allocated to consumer discretionary, consumer staples and utilities.
Canada has emerged in the past several years as a supplier of everything from timber to gold to crude oil, feeding demand from countries around the world, particularly those in the rapidly growing emerging markets. And the country has largely withstood the credit crisis of 2008 that sent developed economies into a recession thanks partly to its resource-intensive economy.
Growing Number Of Options
Investors looking to invest in Canada for years had few venues to do so. EWC, which has been around since 1996, is a broad take on the Canadian space as it replicates the MSCI Canada Index through a basket of 102 securities mostly listed on the TSE. EWC has more than $5.7 billion in assets.
CNPF comes on the heels of Global X's March launch of another Canada-focused fund, the Global X S&P/TSX Venture 30 Canada ETF (NYSEArca:TSXV). The fund is based on an index of the 30 most liquid Canadian companies and is heavily allocated to materials and energy. TSXV costs 0.75 percent and has gathered $3.5 million.
Another exchange-traded fund focused on Canada is the IndexIQ Canada Small Cap ETF (NYSEArca:CNDA), with just under half the portfolio focused on materials and 29 percent on energy. CNDA, which costs 0.69 percent, has gathered $92 million in just over a year since its inception.
Global X has been on a roll in the past year, serving up ETFs that offer new approaches to what the company sees as relatively unexplored niches of the market.
Its equity products tap into everything from individual countries, to gold, oil and other materials. The approach has yielded $1.5 billion in assets in less than two years.
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