An ETF, or Exchange Traded Fund, is a basket of securities such as stocks and/or bonds that are held in a single fund that is bought or sold on an exchange. Over the last 20 years, ETFs have become popular primarily because they provide transparent, affordable access to a wide array of investment strategies.
Some Characteristics of ETFs
ETFs include some characteristics of stocks and other qualities inherent to mutual funds, making them a unique investment structure, offering benefits such as:
- Diversification: Investors own a diversified portfolio of stocks and/or bonds in a single fund which is professionally managed.
- Intra-Day Trading: Similar to stocks, ETFs can be bought and sold throughout the day on an exchange. Investors can place various types of orders, including limit and stop-loss orders. Mutual fund shares settle after the market has closed.
- Cost: The management fees for index-tracking ETFs are often lower than mutual funds, and they are generally more tax efficient. Investors may pay a brokerage commission each time they buy or sell an ETF.
- Investment Minimums: ETFs have no investment minimum, with exception to the cost to purchase a single share. Mutual funds typically have an investment minimum.
- Transparency: ETFs disclose all of the portfolio’s holdings on a daily basis, allowing investors to know exactly what they own. Mutual funds typically post holdings on a quarterly basis.
Our ETF Capabilities
Investors may access a wide range of ETF management styles, providing flexibility to meet different investment requirements and risk appetites.
| Indexed ETFs | Active ETFs | ||
| Pure Passive Proxy for Market | Aligns with Specific Investment Goals | Designed to Outperform | |
| Investment goal | Provide market returns | Increase long-term, risk-adjusted returns | Primarily to outperform the benchmark |
| Portfolio construction | Invests in broad market across entire index ("Buying the market"). | Invests in pre-defined subset of market to tilt toward desired factors. | Active insights and ability to invest outside any specific index constraints. |
| Why invest | Transparent, low-cost, beta exposure. | Active insights, with transparent investment discipline of a rules-based approach. | Potential for outperformance in inefficient markets using fundamental research and expertise. |
| Portfolio management | No discretion | No discretion | Full discretion |
| Daily transparency/Intraday trading | |||
Frequenty asked questions
An ETF (Exchange Traded Fund) is an investment fund that holds a group of securities, such as stocks or bonds. ETFs are traded on a stock exchange, which means they can be bought and sold in a similar way to listed shares. ETFs have become popular because they offer transparent and cost-efficient access to different markets and investment themes.
An active ETF is managed by an investment team that makes decisions about which securities to buy or sell, rather than simply tracking an index.
- Portfolio managers may invest beyond index limits based on research and analysis
- The aim is to respond to changing market conditions
- Active ETFs seek to achieve better outcomes than broad market exposure, although results are not guaranteed
Diversification – Investors gain exposure to many securities within a single fund
Intraday Trading – ETF shares can be bought and sold throughout the trading day at market prices
Cost Efficiency – ETFs often have lower ongoing fees than traditional investment funds, although brokerage costs may apply
Low starting amount – There is usually no minimum investment amount other than the price of one ETF unit
Transparency – ETFs typically disclose their holdings on a daily basis
Liquidity – ETFs are traded on exchanges and supported by market makers, helping investors buy and sell more easily
Individual Investor – Buys and sells ETF units through a brokerage account
ETF Sponsor – The financial institution that creates and manages the ETF
Authorized Participant (AP) – An institution that helps create and redeem ETF units
ETF Market Maker – A firm that supports trading by providing buy and sell prices on the exchange
No. With savings plans, even small amounts can be invested regularly – efficiently, automatically, and in a disciplined way.