Ten Years After … (Not the band …)

Ok, so it’s actually 10 years and pretty much 1 months AFTER, to be specific …

AFTER what, you ask?

Well after BlackRock / iShares Canada, back in 2012 took over Claymore ETFs, at the time, the second largest player in the country on the ETF front, and one that had enjoyed strong Asset Growth on the back of significant innovations/product introductions.

So here we are – April 7, 2022 (the transaction closed April 7, 2012).

As you all know, the ETF industry in Canada (and generally globally as well), has enjoyed strong growth rates, in the 20-25% compounded range, annually, for most of the past decade.

Since I have kept track to this day, of the numbers in terms of looking at the ETF space in Canada, of both iShares growth and within that of the growth enjoyed by the former Claymore line-up, I figured I’d offer a few observations:

  • Fundamental Indexing: Upon its launch back in 2006, Claymore’s first “innovation” was in the realm of what subsequently became known as “Smart Beta”, which all of you are familiar with, and the descriptive of which “Smart Beta”, we generally all aren’t crazy about. Strategic Beta (Morningstar’s description), respectively Factors Based strategies both are preferable in my opinion. Be it as it may, I’d note the following: across 5 RAFI (Research Affiliates Fundamental Indexing) ETFs, covering US; Canadian; International; Emerging; and Japanese equities, AUM has actually DECLINED over the past 5 years (pretty much by a third overall: from CAD 896Million back in Mar 2017 to some CAD 583M as at Mar 31, 2022). THAT, incidentally, just as the “strategy” effectively has begun delivering rather nicely: CRQ – the Canadian market RAFI, for example, is meaningfully outpacing the traditional TSX composite (XIC):

CRQ:

YTD 1m 3m 6m 1y 3y 5y 10y Incept.
10.09 3.34 10.09 19.37 30.42 53.47 64.02 140.46 219.72

XIC:

YTD 1m 3m 6m 1y 3y 5y 10y Incept.
3.81 3.94 3.81 10.49 20.09 48.78 63.62 137.00 352.73
  • Overall AUM – across the former Claymore line-up grew by an unimpressive 1.9% annually on a trailing 5 years basis, in my estimation. Give or take, today’s AUM is at levels only a few Million bucks, already reached back in May 2015! Not the picture of growth – in the context of the growth we are speaking about industry-wise …
  • Precious Metals – Gold and Silver Bullion based ETFs (avail CAD hedged or not) have had decent growth through that 5 year period (but of low starting levels)
  • Thematic – another Claymore “first”, if you will, including Agriculture; Water; and Infrastructure as well as Global Real Estate all have reached decent AUM levels
  • Factors – despite Dividends generally being strongly sought after and having enjoyed phenomenal flows  as a quasi “default”, The dividend side here hasn’t been going gangbusters either … More or less flat for Canadian dividends AUM; -41.5% for US Dividend growers; and +3.1% for Global dividends
  • The “Ladders” – Despite fulfilling an important “need” … as a lot of Advisors effectively outsourced their earlier activities in the realm of building bond ladders for their clients, AND possibly being ideal in a steepening yield curve environment (yes, I know, we are all worried about flattening atm …), across all 4 (Government 1-5; Gov 1-10; and Corporates 1-5; and 1-10), AUM has also decreased notably on a trailing 5 years basis (-22%).

What does all of this suggest? Perhaps that once folded into the acquiring company’s larger offering, focus on growing the Claymore Assets after a while faded, or that interest waned (possible as well, the staff that had grown the Claymore product line-up eventually didn’t stick around …). That is a shame, since as noted, Fundamental Indexing, for one, certainly seems to be enjoying a resurgence of sorts.

What is the opportunity out of all of this?

Being the largest in the Industry, iShares Canada also has one if not the broadest product offering.

  • Considering consolidation of products that may ultimately have very similar characteristics (Bonds ETFs?),
  • respectively deciding whether to allocate marketing $ toward specific themes; Factors; or regions, could all be considered to rejuvenate the pace of adoption, or uptake of the overall offering.
  • Highlighting the different “outcomes” to be expected from different “engineering”, or plumbing,

and

  • ensuring the inside salesforce is on top of these nuances all have potential to add value to clients (and the firm 🙂 happy clients … happy shareholders …

Anyways, for reference, here is the make-up of the former Claymore’s AUM currently, versus 5 years ago:

Take Care 🙂

Added 08/04/2022:

in fact, aggregate flows for the trailing 5 years are estimated to have been negative … to the tune of -$35M,

while markets contributed a positive $376M to the overall AUM picture …

So effectively, a thriving franchise heading into the buyout by BlackRock back in early 2012, looks to ultimately be withering away gauging on the activity of the past 5 years (principally lack of sales …)