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About 90 ETFs in Canada have advisor or trailer fees, says Yves Rebetez, managing director of ETF Insight.Getty Images/iStockphoto

Mackenzie Investments is updating its strategy for exchange-traded funds to include passive investments, a segment of funds former chief executive Jeff Carney once said the company would not consider .

Earlier this week, Mackenzie announced it was almost doubling its ETF shelf with the addition of 13 new funds, six of which began trading last Wednesday. The remaining seven funds will launch later next week.

The company stepped into ETFs in 2015 after hiring Michael Cooke as senior vice-president, head of alternative products, a position created to consider products that could include hedge funds, liquid alternatives and exchange-traded funds. Mr. Cooke was previously head of distribution of Invesco Canada Ltd.'s ETF division, PowerShares Canada.

At the time, Mr. Carney, then the CEO, told The Globe and Mail in an interview the company would not consider offering traditional ETFs, but would look only at products using active management.

Traditional ETFs mimic an index, whereas actively managed funds have a portfolio manager overseeing asset allocations.

But now the firm has switched gears, launching a series of traditional index funds consisting of four equity funds and two fixed-income funds. The index lineup will include plain-vanilla offerings such as a Canadian equity fund, a U.S. large-cap fund and U.S. high-yield bond-index fund. Management fees for the six funds range from 0.05 per cent to 0.50 per cent for the fixed income.

"The addition of traditional index ETFs to our product lineup builds on our vision of offering comprehensive investment solutions for advisers and investors across different investment vehicles including mutual funds, pools, separately managed accounts (SMAs) and now a diversified range of exchange traded fund solutions," CEO Barry McInerney said in an e-mail to The Globe.

The introduction of the new index funds make Mackenzie an attractive competitor to ETF giants Blackrock Canada and Vanguard Investments – which are both well known among investors for their lower-cost funds.

The shift in strategy will also allow Mackenzie funds to broaden the firm's distribution network by becoming more attractive to fee-based advisers as well as to the growing number of robo-adviser platforms in Canada. Robo-advisers typically do not include actively managed funds because of higher prices.

"Mackenzie's new ETFs are well suited for all types of advisers and investors as they provide efficient, cost-effective and simple solutions," said Mr. McInerney, who joined the firm in May, 2016. "These ETFs will be made available to all relevant sales channels, including Canada's growing robo-advisor community, where ETFs continue to be an investment solution of choice to offer its funds through."

"The continuous flow to low-cost, broad-based, index-tracking ETFs is an ongoing story in Canada," Daniel Straus, ETF research analyst for National Bank Financial (NBF), said in a recent research note. Nine of the top-10 ETF inflows in 2017 went to either passive equity indexes for various regions, or to passive fixed-income index ETFs for different credit profiles.

However, active ETFs are growing in Canada as a majority of the large players in mutual funds – many of which have just entered the market within the past year – continue to launch actively managed products.

Active ETFs make up about $27.3-billion of the $147-billion in ETF assets under management in Canada as of the end of December, according to National Bank Financial.

"The increasing popularity of this category speaks to the conviction shared by Canadian investors that there might be a place for active management among opaque and difficult-to-access asset classes," Mr. Straus said.

Franklin Templeton Investments, which entered the ETF market in May, 2017, continues to focus on its actively managed lineup, with three new ETFs expected to list on the TSX this Monday. The Franklin Liberty Core Balanced ETF (FLBA) will be an actively managed fund, while the Franklin LibertyQT Global Dividend Index ETF (FLGD) and Franklin LibertyQT Emerging Markets Index ETF (FLEM) are strategic beta funds. Management fees for the funds range from 0.45 per cent to 0.55 per cent. The three funds will be added to the LibertyShares ETF lineup – which will house a total of seven ETFs.

"In building out our ETF platform, we are now offering advisors and investors smart beta ETFs that invest in global dividends and emerging market equities, providing a range of options to help diversify a Canadian-focused portfolio," Duane Green, president and CEO of Franklin Templeton Investments Canada, said in a statement. "We are also adding an active ETF to our line-up that invests in North American equities and fixed income, offering Canadian investors access to sectors that are not as well represented in Canada, like health care, industrials and information technology."

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