A Look at the New RBC ETF Launches
These new ETFs from RBC are a step forward for the Canadian ETF industry.
On March 8th 2023, RBC Global Asset Management expanded its ETF lineup with a total of eight new ETFs. Notably, all eight ETFs are debuting as ETF shares class series of existing RBC mutual funds and will charge management fees within the range of 0.60% to 0.85%.
RBC's decision to launch an ETF share class series is a great example of the value that competition provides for the average investor. As more and more fund managers add ETF options to their fund lineup, investors stand to benefit from lower fees and better tax-efficiency.
With this launch, RBC has significantly expanded its ETF offering to compete with the asset management divisions of other big Canadian banks like CIBC, TD, BNS, BMO, and NA. Along with overseas firms like Vanguard and local boutique ETF firms, the Big Banks play a crucial role in the Canadian ETF landscape. Let's take a look at the new RBC ETFs.
Equity income ETFs
The RBC Canadian Equity Income Fund (RCEI) tracks a portfolio of Canadian equities selected for above-average dividend yields. Like many Canadian dividend ETFs, it is heavily concentrated in large-cap financial and energy sector equities. The current series A mutual fund share class has a dividend yield of 3.9% and makes monthly distributions.
Looking a the portfolio of the existing mutual fund share class, we see that the top holdings comprise a mixture of Canadian bank, pipeline, and railway stocks. Overall, RCEI's top holdings are similar to its benchmark, the S&P/TSX Capped Composite Total Return Index minus some non-dividend-paying, large-cap Canadian tech stocks like Shopify (SHOP).
International ETFs
Investors looking for ex-North American market exposure can opt for the RBC International Equity Fund (RINT) or the RBC Emerging Markets Dividend Fund (REMD). The former tracks equities from developed markets like Europe and Asia-Pacific, while the latter holds emerging market equities with above-average dividend yields compared to peers.
RINT's mutual fund equivalent has numerous European, U.K., and Japanese equities in its top holdings, which is unsurprising given that it is benchmarked to the MSCI EAFE Total Return Net Index. In comparison, REMD is benchmarked to the MSCI Emerging Markets Total Return Net Index, with its top holdings from Taiwan, China, Korea, and India.
Equity factor ETFs
The RBC North American Value Fund (RNAV) and the RBC North American Growth Fund (RNAG) offer factor-oriented investors exposure to Canadian and U.S. value and growth stocks respectively. Both ETFs are benchmarked to a 60/40 and 50/50 mixture of the S&P/TSX Capped Composite Total Return Index and the S&P 500 Total Return Index respectively.
Looking at the mutual fund equivalents, we see that RNAV's top holdings mostly consist of Canadian banks, railways, and pipelines, while RNAG's top holdings look the same but with a splash of mega-cap U.S. technology sector stocks. The former has a slightly lower price-to-earnings ratio of 13.8 and price-to-book ratio of 1.9 compared to the latter at 15.5 and 2.6.
Sector equities
Investors who prefer selecting individual sectors can make use of the RBC Global Energy Fund (RENG), the RBC Global Precious Metals Fund (RGPM), and the RBC Global Technology Fund (RTEC). These ETFs will provide sector-specific exposure to global energy, mining, and technology companies respectively, benchmarked to MSCI World sector indexes or the S&P/TSX Global Gold Index in the case of RGPM.
The mutual fund equivalents of RTEC and RENG feature a U.S. heavy focus, with U.S. equities comprising 88.5% and 59.5% of their portfolios respectively. This is due to the dominance of U.S. technology and energy sector stocks under a market cap-weighted methodology. In contrast, the mutual fund share class of RGPM features an 86.6% weighting to Canadian equities thanks to our strong mining sector.
Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.
