EMBARGOED – Product news: Whitelabelling comes to Canada

Evermore Capital Inc. is launching the first whitelabelled ETF under its Evermore LaunchPad offering. [confirm still the case. have requested]

Evermore, which launched Canada’s first suite of target-date ETFs in 2022, began offering the service earlier this year following the closure of those ETFs. White labelling allows an entity to launch a product under another firm’s registration as a portfolio manager and investment fund manager — in this case Evermore’s — to reduce the entity’s compliance and startup costs.

The product is the ForAll Core & More US Equity Index ETF. It’s a dynamic asset-allocation ETF that uses other ETFs to track an index created by ForAll Investment Research Inc., which is based in Powell River, B.C. The ETF will trade on the NEO Exchange under the ticker FORU. [adjust if already trading]

Myron Genyk, CEO of Evermore, said FORU could work for an investor who wants exposure to the S&P 500, but who wants “to try to get additional upside when markets are going up, and not to do worse when markets are going down,” adding that ESG investors may appreciate that the ETF partially tracks a fossil-fuel free index.

Twenty percent of the ForAll index is the core: it always tracks the S&P 500 Fossil Fuel Reserves Free index, using the SPDR S&P 500 Fossil Fuel Reserves Free Index ETF (SPYX). The rest of the index dynamically allocates among four ETFs: 30% will dynamically allocate between the BetaPro NASDAQ-100 2x Daily Bull ETF and the BetaPro S&P 500 VIX Short-Term Futures ETF; and 50% will dynamically allocate between SPYX and the iShares Gold Trust.

FORU is hedged to the Canadian dollar. The maximum annualized management fee will be 1.08% in months with positive total returns, and zero for months with negative total returns.

Reid Baker, president and CEO of ForAll Investment Research, said he wanted to launch the product himself, but many folks suggested he consider white-labelling. After approaching Evermore, “I came to the conclusion pretty quickly that this was the best way to get the ETF launched,” he said, upon realizing his upfront costs would be lower and the process faster.

“All the agreements with the third-party service providers, that’s all taken care of by them,” he said. “I created the index, and I have an agreement with Solactive to do the calculation and the administration of that index, and Evermore takes care of the ETF tracking the index” in exchange for an ongoing fee.

Genyk said Evermore made minor adjustments to ForAll’s index “in ways that are not going to perceptible to the end investor, but to make it friendlier for the ETF ecosystem” and therefore easier for market-makers, Genyk said. “If you make something that’s overly complicated or prone to error, they just won’t quote it.”

Genyk said the whitelabelling ideas coming his way have generally been examined thoroughly, though Evermore can’t guarantee a product’s success.

“It’s like knowing whether a movie is going to do well at the box office,” he said.

Evermore helps the movie get into theatres instead. “If someone’s got an idea for 4D, shaking of seats and splashing of water, you’re going to get into [a small] percentage of theatres,” Genyk said, extending the metaphor. “So you’ve got to make your movie work so that you don’t need all that 4D stuff.”

Those types of adjustments aren’t always required, however.

“In some instances, they’ve already been running the portfolio as an [offering memorandum] fund [for example], so they’ve already established a track record and just want to bring it into a different format,” he said. “The TV show worked, so let’s make it into a movie.”

White labelling has taken off in the U.S., with Bloomberg’s Eric Balchunas reporting that more than 100 ETFs have been released using that method. U.S. white labellers include Exchange Traded Concepts, Tidal and ETF Architect, an arm of Alpha Architect.

TK REST

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.