Toronto-based Redwood Asset Management Inc. has expanded into exchange-traded funds with the launch of ETF versions of two existing mutual-fund mandates. Redwood Tactical Asset Allocation (RTA) and Redwood Core Income Equity (RDE) opened for trading today on the NEO Exchange.
Both new ETFs, and their corresponding mutual funds, are managed by Craig Basinger, chief investment officer of Toronto-based Richardson GMP Ltd. Basinger employs fundamental research in conjunction with a proprietary quantitative scoring system and technical analysis. His investment discipline involves identifying economic trends and expected returns for asset classes, sectors and investment styles. (Coinciding with the ETF launch, the mutual funds formerly bearing Richardson's Connected Wealth trademark have been renamed under the Redwood brand.)
Redwood Tactical Asset Allocation will invest primarily in ETFs. Its prospectus allows the fund to hold anywhere from 100% to zero exposure to equities. Foreign content is expected to be in the 30% range, but the upper limit for foreign securities is 50% of the portfolio. While about 80% of the tactical ETF's holdings will be determined by a rules-based quantitative model, the remaining 20% can be allocated at the manager's discretion.
The stated objective of Redwood Core Income Equity is to outperform the Canadian equity market over a period longer than five years by investing primarily in large-capitalization, dividend-paying Canadian stocks. Holdings may also include income trusts, real estate investment trusts and other ETFs. Up to 35% of assets may be held in dividend-paying U.S. equities.
The management fee for each new ETF is 1%, which is the same as Redwood charges for the Series F mutual funds that are distributed through fee-based advisors. For the Series A mutual funds distributed by commissioned advisors, the management fee is 2%, out of which Redwood pays trailer commissions totalling 1% annually. The mutual funds and ETFs are also charged operating expenses.
