Pat Chiefalo, head of ETFs and indexed strategies at Invesco, at their offices in Toronto on Jan., 21.Christopher Katsarov/The Globe and Mail
Invesco Canada Ltd.’s new head of ETFs, Pat Chiefalo, has spent his first year on the job trying to figure out how to keep investors from walking out the door.
Invesco Canada – a subsidiary of U.S.-based global asset manager Invesco Ltd. – entered Canada’s exchange-traded funds industry in 2011 under its prominent investment brand PowerShares.
Alongside several other ETF pioneers, it quickly became one of the top five ETF providers in the country. But over the past seven years, as more competitors have entered the ETF market – including Canada’s Big Five banks – Invesco has struggled to maintain market share.
During that time, the company retired the PowerShares brand, underwent several leadership changes and saw hundreds of millions in ETF redemptions. Even as ETF sales in Canada hit a record of $53-billion last year, Invesco slipped to 10th place in league tables.
Today, Invesco manages about $4.2-billion in ETF assets here.
Almost a year into his tenure, Mr. Chiefalo, who was formerly head of BlackRock’s iShares Canada and is now also Invesco’s head of index strategies for Canada, has plans to turn that around.
“What we really needed to do was refocus the Canadian ETF business,” Mr. Chiefalo said in an interview with The Globe and Mail. “Invesco has been present for a lot of years but we really needed to make it more current and relevant to the markets today and far more relevant and present to the Canadian investor.”
Part of that plan has involved hiring four ETF specialists and an ETF project manager, and expanding Invesco Canada’s family of environmental, social and governance (ESG) funds – a segment of ETFs that is increasingly popular with investors.
ESG funds currently make up 2.8 per cent of the total of $323-billion in ETFs in Canada. Aside from a slight lull in 2019, ESG ETF investing has been rising steadily since 2017. The number of ESG ETFs doubled from around 50 in 2020 to more than 100 in 2021, according to a recent report by National Bank Financial.
With investors and their financial advisers beginning to ask asset managers how to integrate ESG into their portfolios, Mr. Chiefalo knew it was an area he needed to expand and educate investors about.
“Investors need to think about the potential growth and performance of ESG, but also risk management,” Mr. Chiefalo added. “I don’t think traditional benchmarks and traditional portfolios today properly take ESG risks into account.”
Invesco Canada entered the ESG ETF space in 2020 with two funds that track indexes developed by S&P Dow Jones indices: the Invesco S&P 500 ESG Index ETF ESG-T and Invesco S&P/TSX Composite ESG Index ESGC-T. The company also launched an actively managed fixed-income ESG ETF. (The indexes include ESG screenings to target certain companies.)
In November, Mr. Chiefalo added two more ESG ETFs that track 100 innovative companies from the tech-heavy Nasdaq Stock Market.
Last week, Invesco boosted its number of ESG funds to 13, launching an additional eight ESG index funds listed on the Toronto Stock Exchange.
Expanding its ESG lineup marks the “first step in the reinvigoration of Invesco’s Canadian ETF suite,” Mr. Chiefalo said.
ESG will continue to be a “main focus of the Canadian ETF business” in the future, he added.
Mr. Chiefalo won’t put a number on where he wants to see the company grow in terms of assets or market share, but said he is aware that “keeping current” in an industry that is “known to move superfast” is extremely important.
“Over the last few years, a lot of money has gone into more traditional market cap benchmarks and even fund-of-funds products, and those are areas where we have not have kept pace,” Mr. Chiefalo said.
“But we believe ESG allocations – particularly ESG benchmarks – could potentially become as important as traditional benchmarks. And that makes ESG much more relevant and important today.”
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