CIBC Asset Management is expanding its ETF lineup with new international equity and all-equity asset allocation ETFs. This project builds on a partnership that started with Canadian and U.S.-focused factor ETFs.
Avantis is known for a rules-based, research-driven approach that tilts toward value and higher-profitability companies. The goal is international stock exposure without simply owning the market at market weight.
Key Takeaways
- CIBC Asset Management and Avantis Investors expanded their joint ETF lineup with international equity and all-equity options.
- The Avantis approach is systematic and factor-based, emphasizing lower valuations and higher profitability.
- Asset allocation ETFs act as a single-ticket portfolio, holding multiple underlying funds for global diversification.
- These products trade on the Toronto Stock Exchange, which may involve currency considerations for U.S. investors.
What exactly did CIBC and Avantis launch?
The announcement covers new international and asset allocation equity ETFs under the CIBC-Avantis collaboration. They are positioned for retail and institutional investors looking for global diversification tools.
This follows an earlier rollout of four factor-based equity ETFs focused on Canada and the U.S. Additional international offerings were released in the weeks after that initial launch.
The lineup provides international equity exposure and a single-ticket all-equity asset allocation option. The funds use market data to maintain intended factor tilts across different regions.
Why does international matter if you already own U.S. index funds?
Many U.S. investors are concentrated in domestic stocks, even when portfolios look diversified across sectors. International equities help reduce home-country bias and add exposure to different economic cycles.
International diversification can come with trade-offs like lagging returns and currency fluctuations. The core idea is risk-spreading to make a portfolio less dependent on one economy.
What is Avantis’s factor-based philosophy, in plain English?
Avantis uses a systematic process informed by academic research on company characteristics called factors. The emphasis is on lower valuation companies and higher profitability companies.
Factor strategies typically hold broad baskets of stocks that score higher on these targeted traits. They aim to maintain diversification across regions, sectors, and company sizes.
Factor funds can behave differently than plain market-cap weighted index funds. Investors should be comfortable with tracking error versus traditional benchmarks.
How do all-equity asset allocation ETFs work?
An all-equity asset allocation ETF functions as a one-fund portfolio. It holds multiple underlying equity funds to build a globally diversified allocation.
The main benefit is simplicity through single-ticket access to global exposure. Instead of rebalancing separate funds, the ETF packages the structure into one product.
The trade-off is reduced flexibility regarding regional weights. You delegate the management process and factor tilts to the ETF rules.
What should investors know about fees and ongoing costs?
Management fees for the suite include 0.19% for Canadian equity and 0.29% for international equity. These fees create a performance hurdle the strategy must overcome.
A management fee is not the same as the total cost of ownership. ETFs also involve operating expenses, bid-ask spreads, and internal trading costs.
How do these compare to plain-vanilla benchmark ETFs?
Common benchmarks like Vanguard-style funds aim to track the overall market with minimal tilts. They often feature very low fees and market-cap weighting.
The CIBC-Avantis funds seek additional exposure to value and profitability traits. This approach can lead to performance that diverges from broad international indexes.
Can U.S. retail investors buy these ETFs easily?
These ETFs trade on the Toronto Stock Exchange, and access varies by brokerage platform. Investors may face currency conversion between U.S. and Canadian dollars.
There may also be different tax documentation and withholding considerations. If you use U.S. brokerages, it may be simpler to look for U.S.-domiciled funds with similar exposure.
What are the key risks with international and all-equity funds?
These are stock funds, so drawdowns can be significant. Returns are also influenced by exchange rates and overseas market performance.
A value-and-profitability tilt can lag broad indexes for long periods. Additionally, all-equity funds do not include bonds, making them more volatile.
Who might these ETFs be best suited for?
These offerings fit investors who want international exposure with a systematic, research-driven tilt. They are ideal for those preferring a packaged all-equity portfolio.
They may be less suitable for investors wanting the simplest market-cap exposure. They are also not for those preferring a traditional stock-bond mix.
The Bottom Line
CIBC’s new international ETFs add options for those seeking global diversification with factor-based tilts. U.S. investors must consider currency preferences and tax situations before investing in Canadian-listed products.
