A Performance Evaluation of the Canadian Actively Managed ETFs

Abstract

This article offers new insights on the merits and the pitfalls of active portfolio management. The Canadian market of actively managed ETFs is the subject of this study. A sample of 22 funds is employed to examine some core issues concerning their performance versus the performance of relevant benchmarks. Standard methodology found in the respective financial literature on mutual funds and ETFs is used to examine the ability of these funds to add value to investors in Canadian ETFs (i.e., positive risk-adjusted netof-fee returns), in other words to assess whether the ETF managers possess material selection skills. The ability of the managers to time the market is evaluated too. The empirical findings are supportive of the ETFs’ failure to perform as they are supposed to. The majority of funds produce significantly negative alphas, whereas the managers of funds seem to be unable to time the market efficiently.

TOPICS: Exchange-traded funds and applications, performance measurement, developed