Headrick says that existing demand and established relationships in the Canadian market drove the choice to launch in Canada as well as the decision to start with these four products. While Capital Group has a huge global roster of products, Headrick insists that Capital Group Canada is very intentional and targeted about the products they’ll offer in the Canadian market. He emphasizes that at the moment Capital Group only offers 11 mutual funds and three SMAs. Those products, though, are actively managed ‘core’ strategies. Headrick says that Capital Group’s goal with their ETFs is to sit at the core of even more investor portfolios.
While Headrick says Capital Group Canada has no immediate plans to launch some of its US strategies in the Canadian market — the way JP Morgan Asset Management recently did — they will remain attentive to investor and advisor demand in shaping the next stage of their product offerings.
That attentiveness, Headrick explains, is key to Capital Group’s strategy because they want to develop deep relationships with advisors, asset managers, and investors. They see a market where advisors are working with fewer asset managers. Advisors are going from a broad set of shallow relationships to a narrower set of deeper ones. In the case of a firm like Capital Group targeting the core of investor portfolios, it’s crucial to get those deep relationships built quickly and effectively.
They are trying to fit, too, in an extremely crowded Canadian ETF market. Per dollar of AUM there are more ETFs in Canada than in the United States. A lot of those products are designated as core, a lot of products are active. Headrick acknowledges that there is a challenge ahead as Capital Group seeks to differentiate itself in this crowded product market. He and his team are doing so by emphasizing the structure of their firm. Headrick drove home the scale of Capital Group and the fact that the firm is private, allowing them to make longer-term decisions like lowering fees.
While the four ETFs are neatly split into two fixed income and two equity products, Headrick says his firm is not opposed to offering a balanced ETF in future. The key to that or any other potential new product launch is that they complete an adequate degree of market research and understand how much appetite there would be for such a product.
