Eduardo Repetto & Caitlin Ebanks - Opening the Avantis CAGE

[Music] This is the Rational Reminder Podcast, a weekly reality check on sensible investing and financial decision making from two Canadians who are hosted by me, Benjamin Felix, Chief Investment Officer, and Cameron Passmore, Chief Executive Officer at PWL Capital. And welcome to episode 401 in Ben. The evolution continues and this week we were joined by a guest that a lot of listeners will know Eduardo Repeto of Aventus. We're talking about the launch of the Aventus ETFs in Canada and the evolution. Certainly it's continuing. We talked about that in the episode. I think it is an exciting time for investors in Canada. This is something that we've been asking Eduardo about since this is his third time, I believe, as a guest in the podcast. We've asked him every time, "When are you guys going to come to Canada?" And they launched USIT products for European investors. First, they've launched in Australia. I think Eduardo mentioned as well and now they're finally launching products in Canada in partnership with CIBC ETFs, which is pretty cool. They talk about Caitlin from CIBC and Eduardo talk a little bit about the sort of genesis of that partnership and the things that they had to agree on and did agree on for this whole thing to work from both their perspectives. It's a super exciting time where we built some, I mean, Frankenstein's not quite the right term. We had some factor tilted model portfolios years ago. It's kind of the history of this podcast where we were talking about dimensional funds, which we use extensively at PWL. We would talk about factor tilts and small cap value and premiums and multifactor asset pricing and all that kind of stuff. We got feedback from listeners saying, basically, "Are you guys just trying to do a sales pitch by talking about this stuff because we can't invest this way on our own?" Why don't you stop talking about it? We had responded by saying, "We're not going to stop talking about it, but what we will do is create some models that you can use to invest in a way that's somewhat similar. To do that, we used Aventus ETFs, Small Cap value ETFs, which were US listed at the time." We ended up with these, I mean, not terribly complicated, but relatively complicated model portfolios where we could say, "Okay, here. Now you DIY investor who's listening to this podcast, you can invest the way that we talk about." It was fairly complex and required US listed ETFs and currency conversion and all that kind of stuff. The fact that now Aventus has launched Canadian listed products, which hold securities directly, as we talked about with Caitlin and Eduardo in the episode, I think is really exciting. Just that piece, the fact that they're Canadian listed and hold securities directly, but then they're also launching an asset allocation product, which, as listeners know, have seen such great adoption in Canada, just makes this whole idea of factor investing as accessible as market cap, at least for equities. And affordable. And affordable, yeah. Super, super low fees, as you said, camera. It's a great continued evolution of access to really smart investing for Canadians. It really takes away, in the past, we've talked about factor investing. One of the potential drawbacks is added complexity. And now, at least for an implementation perspective, that barrier is gone. There's still other things like tracking error and stuff like that that you've got to deal with. The implementation piece, like this is now as easy as investing in XCQT or VQT or whatever other equity asset allocation ETF. Anyway, very exciting development. And it was really nice to have Caitlin E. Banks, director of ETF strategy at CIBC, along with Eduardo Repeto on the podcast to talk about really some of the nitty-gritty details of the products. How CIBC is thinking about this lineup in Canada? Like I know one of the concerns from people that I've been talking to about this. Similar to when a Vantus launched in the US is that these things need a lot of scale to be viable. And so people worry about the products closing down. We had some interesting discussion around that. Exciting development for Canada. And this is a really interesting conversation with the people behind it. Beautiful. Anything else to add? Listen, I probably know who Eduardo is, but I will just mention he's the chief investment officer of Vantus Investors. He is responsible for directing the research, design and implementation of their investment strategies, and providing oversight of the investment team and the firm's marketing activities, and also interacting with clients. He's doing a bit of everything over at Vantus. And of course prior to Vantus being established in 2019, Eduardo was the co-chief executive officer, co-chief investment officer and director at Dimensional Fund Advisors up until 2017. So he's deeply ingrained in the factor investing world. And Kaelene Banks is a director of ETF strategy for CIBC. Before that, she was at BlackRock and also BMO on the ETF sites. So she is tremendous experience in ETF space. Very cool. Well, we hope listeners enjoy this conversation. And like we said, multiple times. And I think this is an exciting time for Canadian investors. I did just want to say a couple of things before we go to the conversation with Kaelene and Eduardo. One is that the emerging markets product for Canada will not be launched by the time that this episode is released. There are still a few things that they're working on with a couple of the markets so they didn't have a date for when it will be launched, but they're actively working out. Like it's coming soon pending certain approvals in different countries. But as of the date that this episode is released, it's highly unlikely that it will be live yet. I also want to mention that we gave a pretty glowing review of Vantus here. We think that they do a great job and always have. We don't have any financial relationship with them though, just to be clear. We're not being paid by them to sing their praises. We've been talking about their products since 2019 when they first launched. That's just because we think that they're doing interesting work. They're doing a good job creating good quality low cost products that are not gas station sushi, but we have zero financial relationship with them. So they just want to make sure that that was clear. I also want to mention that during the conversation that Eduardo does talk about expected premiums over a market cap-weighted portfolio, just in talking about what should we expect these tilts to produce. I just want to make sure it's clear to listeners that when we're talking about expected premiums, that's like a model-based expected return based on some combination of future expectations and what has happened in the past. When Eduardo talks about that type of performance, it's an expected premium, but there's going to be a lot of noise around that realized outcome. I mean, we've seen that with factored tilted portfolios in the US and in Canada over time, where even if the expected premiums are positive, there can be extended periods of time where the realized premium is negative. So just to be clear, Eduardo's not saying you should expect a 2% return premium every year, that's an expected return and there's going to be in real life, a lot of noise around that estimate, including the potential for many years of underperformance. Absolutely. Spot on Ben. I've got one more quick disclosure for you guys because we're talking a lot about specific investment products today. From time to time, including today, we talk about various funds that may be available in the US or in Canada. We do not consider our discussions to be anything more than an opinion and we want to remind anyone who might be considering investing in one of these funds after listing to our show to carefully consider the investment objectives, risks, charges and expenses of the funds before investing. A prospectus and/or the summary prospectus should be available on the issuer's website from your financial professional or by contacting the issuer directly. You should read those documents carefully before investing. It's important to make sure any funds you choose to invest in align with your goals and risk tolerances. Now let's go ahead to our conversation with Kate Lee Banks and Eduardo Rebetto. Ed Waddo Rebetto and Kate Lene Banks, welcome to the Rational Reminder Podcast. Thank you for having us. Thank you for coming us. Yeah, it's a pleasure. I'll see you guys again. Yeah, good to see you as always. Eduardo and Kate, nice to have you on the podcast for the first time. Thank you. So Eduardo, Adventist has passed 125 billion in AUM, which it's got to be some kind of record for a brand that's only six or seven years old. Why do you think these products are getting so much traction? Yeah, six and a half years. That's impressive. I remember when we spoke the first time. We're extremely thankful to all the people that trusted us. We started with no money, very little volume. You don't know what it is being sitting in the trade index with ETF in the market. I'd say no volume. Suddenly you see hundreds of shares. And you look around and say, who was that? Because they say, who make that trade? And one day we couldn't find who was making the trade and was a wife of a friend. So now it's impressive. But look, when we started, and I think I would mention before, I always think analogies trying to learn from business and analogies. And imagine that you are starting a business like a restaurant. You want it to be full. What are you going to do? You want to try to have very good food, very good service and also an office. A lot of prices. So for us, it's the same. It's a business. It's a service business. And so we said, look, we need to have good strategy. And that's something that is a must. And we started with what we thought it was amazing, the good strategies. We said, we need to have good service. And that's great. And we're going to have low fees. And we have patented technology to develop strategies. You're very careful when you manage it. It should be good. The point that people don't know, you have no track record. I said, how can I know that you're going to be managing them right? And what not? And they were tons of fear mongers out there with alarms. Oh, they don't have enough people. We don't have armies of unnecessary employees for me. And so some people, traces on day one, we don't know, and that we could do it. We like strategies. They were hopeless. That we were going to deliver. but that hope is that trust we are extremely thin for. And today we deliver, no, 125 million is just a measure of success that we are delivering. That's what we care. We're delivering to our clients, we're delivering to all the people that trust us and we're very happy about that. So I'm curious Eduardo, how did you decide the partner with CIBC to launch your volunteer products in Canada? I called you, Carmen, and you did an analysis. So I say, who can I call now? And it was a tough one. No, no, we have been speaking with CIBC from day one. So we spoke with CIBC for the first time around six years ago, I think in 2019, and we explain everything that we were doing, we explain all our philosophy, we explain everything, but we didn't have track record. And so the conversation kind of died off. But around a year ago, the pick up in, and I guess that CIBC live, but we were doing what we described them, but then the main issue that they have is the, they need a little bit more track record to trust what we're doing. So the growth, the, so the reputation, so the name, part of the our name, the commission come from you guys having us here. And so a year ago, we start picking up in the conversations and we decide to do it together. I know that we have flow from even though we are not selling in kind of the US basic year, but we seek custody records and we have flow from kind of, and we know that there is interest there. Yeah, you guys told me that also, but kind of a huge country is, you know, you have from one place in one corner, the corner is a huge country with a lot of people. We have anti scan not service and remember service is part of the offer and all the time. And so CIBC has the reach. Is it very trusted company? We know them for a long time. And so we look at the idea each other and say, let's do it together. The problem that you have when two companies are often in a product that you know the day is the finance departments of both companies say, I want to make so many basis points and they are companies that I want to make those so many basis points. And you are both and you finish with three and a half percent. I don't know when number you in. And that's bad. But the beauty is that on day one, we were very clear both sides of that. This is what we should charge to be fair to then investor. And we will deal with the finance departments. Then in them, we have to live within these expectations both of us because if not, we don't have enough. That's it. There's not waste time. That's a framework that many times is very difficult to do. And we were able to. We were very lucky that we were able because both companies are very clients focused. And so that's how we came to market. And we have been working for a year trying to get this up and running. And the courtality, the client focus is there. And the reaction of people out there, you know, in Canada, it was in Montreal, Ottawa, now in Toronto, and some of our colleagues have been in other places in Canada together with the CIBC folks. And the reaction has been extremely very happy. So I hope we can really provide an amazing service together to the Canadian investors. And from our perspective at CIBC, as Edward mentioned, everything that we do is with the client focus. So when we looked to build out our ETF shelf, because we are a little bit late to the ETF game in Canada as well. We've had ETFs since 2019, but we're really now starting to make that splash. We started with portfolio construction. So every product on our shelf has a spot in a portfolio. We started by switching our beta strategies to MSCI and Tofutsi. So institutional quality benchmarks. We leverage our existing active capabilities. But then there were some opportunities for us to bring in specialty managers. And that's where of Autist came in incredibly well respected. Very, very good at what they do, very transparent, as well in their offering. So if you are building a portfolio, what you want is for your manager to do what they say that they're going to do. And they've proven that they've done that. So from our perspective, we're super excited to bring these to market to the Canadian investor and Canadian dollars. Yeah, it's cool to hear how that all came together between the two organizations. I'm all so I reach through these many times when two organizations are trying to bring some stomachs, they're difficult to agree on pricing because everyone wants a lot of faces points on it in the day, but there is no room if you want to be competitive and you want to fair. And what's great, if you sold that one, I'm sure you can sold it anything. We've talked for years now, Edward, what you guys potentially coming to Canada. And that was always one of the concerns that if you were going to partner with somebody, you were worried about the fees coming in too high and you just wouldn't launch the products in that case. So it's great that you guys were able to find a partnership where everybody agreed on low fees. Can you guys talk about what strategies you have launched and will be launching in Canada? And the beauty that you notice is strategy is probably better than me because in your so analytical and look at this in great detail, some of the strategies are basically some strategies that we have in the United States. This is a different wrapper, this Canadian wrapper, it's been in the US wrapper. For example, we have a US equity strategy, I think at the ticket is CA US. It's very, very similar to AV US. The benchmark is the Russell 3000 and that's a product that I'm very, very proud of because if I tell you, we launched that one, maybe US six and a half years ago. It underweights large growth in general and that way is large growth. It is more specific but in general terms, it underweights large growth. Large growth over the last six years and a half has helped perform the Russell 3000 by 300,500%. So you say, "Do you have an underweight at large growth? Large growth? How perform the Russell 3000 by 300,500%?" You are eating dust. We're beginning the benchmark for sure. No, it's a health. So that's the way the web approaching investment can reduce the weight so that those companies have fine other opportunities. Other companies have higher respect to returns are more than compensating for that underweight. So it's amazing. So that's one of the products, the US equity. That's up and running. It's listed already. We are going to have an emerging market equity. That is the same as AVM. AVM. Today AVM is the last non-index strategy in the United States ETF. It has seen tremendous following. I also thought about AVUV as a call following AVM. Also, it's called following. It has helped perform the benchmark around 2% a year. Basically, following this approach that AVU has better applied to emerging markets. AVUV, you know, that very well. I remember the survey that you did about going to an island. Our international and small value. We're bringing AVUV also to the ticker. We are bringing also AVUV's live. In the CAUV's live. Then we're bringing CALV. The large value version of AVUV. In the US, we have AVLD. Our US large value strategy has also has done tremendously well. Not only we manage ETF, we manage a fund. We have significant money and so advisory business also in the US, in the last value, not only in small value, very big following. We're bringing a global small value that is going to be listed tomorrow. Friday, that's the same as thinking about AVUV plus AVDB together. If someone wants even one stop shop in global small value, that is what we're providing there. Now, we're in Canada. And in the US people think about international development markets as ify plus Canada all together. Since we're in Canada, we have to split it apart. So we're going to have an iffy product that is going to be also live on Friday tomorrow. And that iffy product is going to be the same as AVDE, but without Canada. And then we're going to have Canada in isolation because this already up and running a CSE is our Canadian equity strategy. Now, all these are kind of targeting US, international and emerging Canada, small cups, large cups, volume. Now, we're going to have like a fan of funds, a global equity strategy. So that is an ETF of ETF, like a fan of funds. It's an asset allocation, like a fan of funds, but an ETF of ETF that is our global equity strategy. That's going to come to market next week. And it's going to invest in our Canadian equity, US equity, international equity, and international equity and an extra juice there by having a global small value. So that's an asset allocation, all in equities. And in the future, we have more products. We probably have balanced strategies that not only equities, but also mixed fixed income, but we're listening. We're listening to people like you, we're listening to tons of Canadian advice, what they're saying, what about that, what about that? We add in the job of providing services. If we can provide a good service, a good fee, we'll do it. You know that in the US, we started with only five. Now, we have like 35 different ETFs in usage. So we started with three, now we have six. And so we're in the job of helping a bicep or held decline. So we're listening. It's a pretty similar lineup to what's in the US, except stripping out Canada from the international component, which makes a ton of sense and then creating a Canada specific equity product, which similarly makes a ton of sense. That's awesome. Now you both talked about fees before and having to be competitive, but how competitive will a fees be with comparable products in our Canadian marketplace? You have the fees because some of the products alive and they don't want to have already filed the registrations. So they are slightly more expensive than the US product. So there is a likely higher cost here in Canada in the US, but it's likely higher expensive. But I'd like to say, the Canadian equity, and hopefully please correct me if I'm saying anything wrong, you will have the numbers more in your head than me. But if you think about the Canadian equity and the US equity, I think that is 19 basis points in management fee. So the fees are very competitive in the U.S. for example, the U.S. equity is 15, so it's a slightly more. They have a lightly higher cost, costly cost and higher cost, but I think that they're very competitive. We can give you a whole table of all the expensive ratios across all of them, and we're always listening to them. No, but you know the day, as I say, we have to be sure to provide something that is interesting to plan in some part of it, interesting to come in the right level of fees. Kaelin, we know what the management fees are. We can see those in the perspectives. I think all the nerds that listen to this podcast already know what the management fees are, but something that I've seen come up as a concern is that we don't know what the management expense ratio is yet, which is going to include the op cost, the operational costs of the ETFs and the taxes and all that kind of stuff. Do we have a sense or do you have a sense of what the MERs are going to be for these funds? Yeah, so we expect the MERs to be just management fee times taxes, so times 1.13, the operating fees we are removing. The other thing I would say on this in terms of fees is we are trying to be incredibly competitive on fees and on pricing. There could be if the ETF owns another ETF, there could be the MER of that third party ETF coming through. If we own a CIBC ETF, we will take that out, so it won't show up there in the MER. So we're possible. We'll try and use the CIBC ETF. It's very important what Catalina says, and we do the same in the United States. Some people give you a management fee and then you have operating expenses and the operating expenses are floating. So if the manager does a horrible job negotiating with the custodian, the manager doesn't suffer the investor suffers. Starting the US we say that's a no, no, no. If I do a good job negotiating with the custodian or a bad job negotiating with the custodian, that should not really affect the life of the investor. I hope I do a good job because I get paid the reasonable amount of money, but if I do a bad job, bad for me, I get paid less and the investor is basically not exposed to that. So I'm very glad that CIBC adopted the same philosophy. That's really good to hear because I know in the rational reminder community where these products have been discussed, there's been a lot of wait and see because we don't know what the MERs are going to be and they could be a lot higher, but the way that you guys described how you're approaching that I think is going to be very reassuring to a lot of people. And just a reminder too, the MER won't be published until like after a year as well. Like it needs audited financial statements before being audited. Yeah, that's exactly it. So people are aware of that and they're like, well, let's wait and see what the MER ends up being after the first year. I think you guys have probably calmed a lot of people's nerves on that topic. And Eduardo, you said you've been on a long time. I've been on a long time too in this whole fee discussion such a refreshing time compared to like when I started where there was low fee awareness, but there used to be market and feeding fees. It would be five times what your total fee is, something like that. It's just an amazing time for investors these days to get incredible, affordable exposure. Look is impressive. I don't know what happened. I think a transparency for sure and people awareness and then a buy such as going out there and being fidgety share is all that probably created a huge, huge, huge two people being more transparent, the moment that you're more transparent and the fees are in your face and you have to be more competitive. And so that's great. So Eduardo, I've got to ask you created this term gas station sushi that became a very famous term, at least within our podcast community. I've got to ask, will these ETF be gas station sushi? Why have we live gas station sushi? You know, that don't have to become beer than itself. I was reading in, I think it was through Jonah and some politician speaking and he used to turn gas station sushi. I say, must have been Russian or reminds of person. I don't know who that person is. And I was not speaking about investment. I was speaking about something completely different. No, no, no, no gas station sushi. No worry man. If we have gas station sushi, we don't have a business. One caveat. One advisor stopped me once and said, look, that is a gas station. I think that is in Pennsylvania. The sushi is here. I've never been there, but he claimed that so I believe him. So maybe gas station sushi from every station but that one. You've been on tour in Canada, Eduardo. Have you had any gas station sushi? No, I'm on the food in Canada is amazing. I wasn't monitoring. I was one known for the amazing cuisine Toronto has also unbelievable. But seeing that thing is in Toronto that you can have fun in the day and they're better. I was in Ottawa. I also have a great meal. In the past I've been in Vancouver, in New Asian food and seafood in Vancouver and it's second to none. I wasn't a Fino one. I remember this little restaurant. Oh my god. It's a good sandwich. I like to eat it. Let me be clear. I was told all the places that they have in me, for example, I haven't been ever in Quebec City and I was told that Quebec City is just, it has a couple of places that I'm believe or when you're paying an emmon on the stakes, suppose they're very good. But for me, the stakes is hard bar because I'm from Argentina and I'm like a steak. But no, no, Canada has very good food, man. So Eduardo, can you talk about the decision to launch ETFs as opposed to mutual funds in Canada? The fact that we always worry when we're not just strategies is the strategy. Who would like the strategy? If it's a good strategy, we don't want them bands like that cheap sushi, no? We want to be sure that the strategy is right. Then we worry about the wrapper because inside the wrapper, you can put any kind of strategy. I can put any strategy, it can be any wrapper. The first decision was to have the strategies that we thought were very good for Canada invest. So the thing was, okay, we need to put it in the shape. And so we decided to launch at least first in ETFs and why is that? So ETF, I think about ETF, a mutual funds as ETF, the vehicle of the future. So I think a little bit of pay funds, Ben doesn't know what the pay fund is because he's too young, but you come around me. We have used plenty of those. Putting coins. So I think a little bit of a mutual funds as a pay fund. So if I had to go first one thing, I would go to think to launch whatever I think that is the best vehicle that is available there. The ETF provides a lot of protections for share court and set a like in the mutual fund you get blindsided with cash flows in ETFs. You never get blindsided by cash flows. I like that for fairly stolen investors. Now I'm not preclude in having funds. Look, we are a service and some people really need a funds instead of ETF. And so the man is there. CIVC is more than willing to go on land funds. You know that in the US we have funds. We also have ETFs and we have funds. Now we launch in CITs, that is a different vehicle for retirement. Funds in the United States are getting a lot of pressures from ETF on one side and CITs on the other. If you see the Estaria de Fans, for example, have seen net outflows, CITs are tremendous in flow. That's telling you something. The market is decided and around that. But there are some people that happen needs for funds. In Canada, some people need the funds that we tell us and we do the right thing. Cuffling, you may want to speak about this from the CIVC point of view. We completely agree. So we're listening if there's a demand for mutual funds. Like we're open to future launches as well. So this is just the beginning for us. We started with eight and we'll see what the market wants. I did grow up with payphones for the record. My first cell phone, my parents bought me because I didn't have quarters to call them from the payphone. And they finally decided that was okay. They got worried about me, so they bought me my first cell phone. I'm not that young. Okay. Ben, I do want to just jump in here as well on the fee conversation around mutual funds versus ETFs as well. And just assure everybody that when CIVC launches an ETF with an equivalent mutual fund, either like existing or the other way around, launches a fund version of an ETF, we price them both the same fee based. So your fee based mutual fund is going to be priced the same as your ETFs. So it wouldn't be as launching mutual funds to make higher margins or anything. It would be priced the same. Yeah, that makes sense. That's the same as we do in the US. Look at that. You see, that's what I'm telling you. You start speaking with the CIVC and then you say, "Oh man, these guys have thinking so similar to us, so many products." Another question that I know came up a lot when the Raptor and my community started discussing a Vantage coming to Canada was who's actually going to manage the implementation of these Canadian listed products? Like what specifically is a Vantage doing and what is CIVC doing? We can get a little bit technical. The funds or the ETF are CIVC's sponsor ETF, but the manager is a man. So the same portfolio manager is, you know, the portfolio manager managing these strategies. Now in the case of ETF, you have other functions, capital markets, for example. Well, in any fund, you have a bunch of other services like Accounting, Castell, all that is CIVC and Cutlin can speak about that. The portfolio manager and the guys making decisions they might be sending the trades even the guys training at our guys. So from CIVC's perspective, we're responsible for the ETF itself in the sense that we're doing the reporting, the operational, the controls, continuous monitoring, making sure that we are staying within Canadian regulatory guidelines. Again, the capital markets, reconciliation, all of that. And here's another question I know the nerds want asked, will the Canadian listed funds hold the securities directly or hold US listed ETFs? Whenever we do something, we are always thinking about what's the right thing for investor, because if you don't do the right thing, you're not going to grow them. No one will buy them. And so, this ETF holds the securities directly with one exception. So we're buying securities in the US, in Canada, we're going to be buying securities in the machine market when it's up and everything. It's one exception, what's exception? The fund of funds, cash, so the global equities. That's the fund of funds by the other Canadian based ETFs. We're not buying US based ETFs here at all. This is one of the reasons why we're going to be buying securities in the US. When I mentioned before, this is a strategy that you have seen in the US translated to Canada with some exceptions, because we need to separate Canada from EF and whatnot. That's what I meant is, it's like we're buying the same approach by the underlying security. No, the final funds is different. It's a case, it's different because it's an asset allocation fund. He buys the other ETFs. He buys the other ETFs, but because the other ETFs hold security directly, the tax efficiency of buying the Canadian listed ETFs is great. It's less common now, but for many years, it was very common for emerging markets products, for example, to have a Canadian listed ETF, that just held the US listed ETF. But as you guys know, that comes with some potentially meaningful tax inefficiency. Another way to speak about Canada, but look at usage. In usage, when we launch the usage, we have our emerging markets usage, and by securities. It goes out there and by securities. And they want here, it would be the same. In usage, we have this more, while it goes on by securities. It's a similar approach. We do a slightly different in Australia for some very good reasons for Australian investors. But I think that this more than the bandages from the Australian investor structure that we have, that buying securities. But for the rest of the markets, we always try to do whatever we think that is the best for an investor. One of the products that I'm most excited about is the all-equally-assed allocation ETF that you mentioned, the fund of funds. Can you talk about how aggressive the factor tilt will be in that fund relative to market cap weights? Let me describe more or less what the asset allocation would be. So that fund of funds is going to have this coming next week. So it's 30% in Canadian equities. And what is going to buy CAC? And then the rest is basically market cap weights for the rest of the markets. So the US comes around 40% EFI and emerging markets a little bit less. And then on top of that, has an 8% allocation to global small value. So the tilt is the tilt of our core-like strategies with an extra tilt to small value. That allows us to provide in our opinion significant value already. And the most interesting thing is how we're tilting. You can tilt in different ways. If I tilt over things that don't have higher spectre returns, by increasing track in error and increasing cost for no benefit. So if I tilt over cheap sushi, yeah, you pay more, you have all the things, but you don't have the benefits. So you have the track in error, you have the extra rates, but you don't have the benefits in expected returns. So the way we're tilting is really in efficient way in order to increase spectre returns while we increase in track in error, but very efficient, very not as much as we are tilting raw. Yeah, we do have some questions about tracking error too, but just on the geographic allocations. So you mentioned that they're going to follow market cap weights. Is that market cap weights as of to. Outside, canna 30%. Yeah, yeah. So excluding Canada, are those market cap weights as of today or is it going to consistently follow market cap weights over time? Follow. Okay, that's good. Unless you have a reason to have some kind of kicks like weight, nothing that tell you less not float. And so the idea is floating. Even if you have a fixed weight to Canada, let's suppose that tomorrow Canada becomes a luscious market in the world. 30% may be underweighting Canada at that point. So you'd say, "Hey, we cannot have 30%, we may have to have 50." So even when you have a fixed weight, you have to keep an eye, but you can make more fixed the rest. You're going to have to float. When you look across the asset allocation ETFs are available in Canada, some of them are floating market cap weights, and some of them are fixed weights. I like what you guys are doing with the floating market cap weights. Some curious Eduardo, how much outperformance and tracking error is it reasonable to expect from cage relative to a market cap weighted but geographically matched ETF? I'd say that question. So you say geographically much, because if not, you have a lot of tracking error even for the same. So that's the value, it would be 1.5%, 2%. And the tracking error is around 34%. So I give you ranges. I can give you a specific number if you will compute this, but range is better because this is not exact signs. And in a market moment, you have a little bit. At 150 and 200 basis points a year, you know that we have been managing this strategies if I have been managing Canadian equities inside our US ETF, we have been managing EFE, we have been managing the US, we have management, but so we have a pretty good idea of how this will be okay. We put it together for the last six and a half years track record in those. So we have a pretty good idea of how that would be okay. And this number has started recently. Tiltz and Canada in general have been pretty nice in recent history. Caitlin Avantis in the US publishes a monthly ETF field guide that has the equity composition of each fund. And I know that our listeners find that really, really useful just to see what's going on under the hood with these ETFs will event as or CABC be publishing something like that for these Canadian listed ETFs. So this question keeps coming up. So we definitely understand like the value of this piece. And we are doing our very best to take all the pieces that Avantis has as collateral and Canadianize them, but also work within Canadian regulators as well. So there are some restrictions in terms of reporting, especially while we're in the first year. So those are just considerations that we are making, but the bones will be there for sure and more to come. I have a meeting this morning with an advisor here in Toronto. And that certainly was brought up. And he also wanted to have access to the podcast by HAL. I know you come at a no-hAL very well and you went too because you have him here. And so say how can I have access to the KAL podcast anyone can have access because it's in Apple in the Apple store. We certainly do webinars with those guys, Karl, Mayor Stadman, all our other people. Look, we're here to help advisors. If we can help advisors, the end investor is better off. If the advisor doesn't need help, that's okay. But the time, I was to say these guys can help me bring in this field guy or bringing the river finance experts or any other kind of experts. We are here to help our names here. We see it's very focused on that. I like what you guys and HAL are doing with their podcast. I think HAL has been on this podcast three times. And I was actually on your podcast once I'd run it with HAL. I was the guest. I know. And when HAL is very mayor, mayor is a mayor in the scene. So I put the advice that we speak today. He's the big part of our mayor or some. And so I said, look, I'm going to try to get a couple of books signed by Mayor and HAL and send them over because he knows all the books and say, okay, maybe I can do that. I think it's important as well for us to make the distinction that in Canada, there are some rules with like what we can brand for advisor use versus what we can brand for investor end use as well. So our goal is to be transparent and honest and open in our communication. But then also to make sure that we're meeting the investor where they are, who they are. So you may see similar pieces, but they're directed at different audiences from our perspective as well. Just for clarity, that's how HAL HERSH field that we've been talking about. And yeah, he's been a guest in number times and as a good friend. As mayor was also a guest, great interview. So Eduardo, CAC, the Canadian equity offering is quite unique in the Canadian ETF market. Can you share how its average characteristics compare with the TSX index? Basically, related to the Canadian market, shifting weight from company to HAL, bad profitability and very high price, related to the adjabook budget. So if a company has high low discount rates and made it in the price of a company, with low profitability and high relative price, related to the adjabook value, that company has lower respect to the transfer. So we're going to underweight those companies in large caps and mid caps. In small caps, we make complete exclude those companies because it doesn't produce too much stricken error and they have horrible returns. So underweighting companies will lower respect returns. So that is being shifted towards companies that have higher profitability, higher adjusted book divided by price or low price. Despite the high profitability, what is an indication of higher respect to the terms? And that overweight is higher in mid and small cap companies where the premiums are higher because the valuations have more dispersion. So similar what you have in the US, in the US, in the US, in the US, is strategy is basically the same. And the weight company will lower respect to returns because they identify with the low profitability and the very low book to price and all the weight companies with high profitability. High book to price in particular in small and mid caps where the premiums are much higher. It's unique. The amount of shift you have is around 15% underweight and 15% overweight. The shift from reds to green and most of your audience know what I mean, reds to green. Reds is a company that have low profitability, low book to market and greens high profitability, high look to market. The shift is underweight. The reds are around 15% and overweight. The company will higher respect to return by 15%. So it's still track in error sensitive, you know, they have to think about to 1.5 to 3% track in error, but you have good value added. And that's what you have seen in all our core like strategies in the US. Yeah, that's so good. And it really is a unique product in Canada. When we did our model portfolios back in 2019, when we used your US listed ETFs, we were trying to give our listeners because people who listen to this podcast hearing us talk about factor investing, but they had no way to implement it in their portfolio. So we did our models back in 2019 to give them an approximation of what we do, but we had no option for a factor tilted Canadian equity ETF. And still to this day, there's not really not a whole lot out there. No, no, no. Do you say yes? Yeah. C-A-C-E is live. C-A-C-E is live. Right. Other than C-A-C-E, but yeah, you're really the only game in town for a high quality factor tilted Canadian equity ETFs at the very end. very cool development for the Canadian market. How is turnover, noting that there are potentially differences in the structures in Canada and the US? How will turnover of the funds be managed to minimize capital gains distributions? All our strategies have very low time. We work on valuations at the end of the day, but you have low time and over. And we're very cognizant of course. So let's suppose that you say I'm going to, and this is an example. If I'm going to pick up one basis point of excess spectrature, and I'm not going to spend five basis points in trading costs, that's just kind of dumb. So immediately when you are thinking of valuations and you're taking into account a trading cost, an old kind of implementation cost beyond trading, you say, okay, your turnover is going to be low. So the most aggressive strategy for turnover for us probably small value, tend to have around 25% and over a year. So it's a relatively low turnover. You think about that, 25% and over a year is around 10 basis points a day of turnover. It's 253, and there's a day. So it's a very small number. If you look for the core like a strategy, that's even lower, well lower. So the amount just trading that you need to do to keep the strategy pure to the objectives is not too much. That's a huge advantage whenever you're dealing with taxes, huge advances. And in particular when you have cash flows, because when you have cash flows, you can yield the goods with the cash flows in the growing strategy, you can say, well, this is a good way to move away. Now I have another one to buy you. How do you have a cash flow? You don't have to present money to it. So considering cash flows, considering the low turnover, we think that we have something that is very, very interesting even for tax-value investors. It's important to take all this into account. I'm not a big fan of a strategy should be high turnover. Someone may call an amazing strategy who had the norther, that's fine. But we don't do those things. Caitlin, roughly how much AUM do you think one of these Canadian ETFs needs to remain open and viable in the long run? We're super committed to this suite. If we weren't and we were just testing the waters, we would have launched one or two, but we launched a suite of eight, including that new products that aren't available anywhere else. So we don't have a dollar amount, but we are committed. We know that these are going to be successful, so we don't have a dollar amount because we're not worried about it, if that makes sense. Maybe a little, we're confident, but we've seen the success. And Evantes does what they say. They've had consistent returns, the process works, and we're confident that Canadian investors are looking for a way to invest more tax efficiently in this suite. This question is a very valid question, because when we launch our ETF in the United States, when you guys may remember, it's end of September 2019, we were getting that question, we were getting that question every day. And on top of that competitor, we're saying, "Oh, they have no money, they will shut down tomorrow." And so not only we were getting the question, because of valid concerns as a fiduciary, you have also because they were being fed by information that was trying to create more uncertainty. And you see the story. We have good products, we have good service, we have low fees, and we think that the people are clever. If we get something at this pool, at the pool price, and with fee, we will service those guys are clever. They will take advantage. And that's what we want them to do, to take advantage and use these as much as they can if that's good for them and within a disease. So we're very confident. Eduardo, just thinking more generally about Evantes, you were last on in 2024. Have there been any enhancements to the Evantes approach to a portfolio implementation since last time we talked? Yeah, we can speak about a couple of things that we touch here and there. I always think about enhancements, sometimes we speak with some people and that's not you by the way. That says, they want you to make a change every quarter. It's common, it's a kind of consultants want you to make a change every quarter. If you make a change every quarter means that the last quarter something was rough. You think, "Well, right, why don't you change every quarter?" And the beauty of what we have done is it was thought very well from day one. So the part may change is very, very high. Still, it's not perfect. I'm never going to claim that we're perfect even we make a hundred more changes because we discover the new empower. It's not going to be perfect. Perfection is not achieved all you want to strive to be there. But the body's high. So we have makes and tweaks in our momentum filters. We have touched a couple of markets because of a content role without chance of our professional ability. But most of the things are similar. The tweaks are more and more happen and some more will happen. They are already planned. But the biggest, biggest thing that we know that needs work because perfection is not there is the professional profitability because you know that we're using last 12 months. We need this future. Okay, it's like how much money the company is going to make in the future and using the measures that we have having information about the future and future returns. But if you tell me how to predict the future, that's why perfection is not achieved. We never do perfect. But maybe there are ways to have a better proxy for future profitability. And that's something that we're always looking. Maybe there is information that is available now. Maybe it's information that may not available now, but maybe available in the future. And so we're always looking and trying. We have played with something. Somethings were already promising. And then you test them enough that they say, okay, it's not working. But we have a hope. We think that we're always testing new things and we think that there's a couple of things that may work. And look, I'm really surprised that we say later, it doesn't work. That's the horrible life of a researcher. A researcher is full of hope and full of frustration. And it's a horrible life of the researcher. He said, "Oh man, I'm excited. This is great." And then boom, someone just punch you down and say, "Oh, that's a work." You have to have a nurse of a still, you know, and perseverance like no other. So what's the most hopeful research that you're looking and implementing now? Well, implementing now we have some a couple of things from moment on that we're doing. But the most hopeful research is trying to be able to have a better prediction of profitability and the future profitability growth if you want to think about. So we are quite good at breaking the level. But the derivatives of the level, the variations of the level, is that anything that gives us hint on indication. And we have something that we tested a lot. But till I don't think that it's producing the benefit that we should see. So there is something that is working, but that's a left-footed situation life. I do have one more question about CAGE. So we talked about the geographic allocations. How are the factor tilts decided? The thought behind the question is, will the factor tilts change over time for any reason? Okay. This is a portfolio that is more dividend than the core strategy. So you look at our AVDE in the USAVM and AVUS here is CIC. It's a Canadian equity, CIS, the US equity, CDI, the EFE and the merchant markets. So is those tilts plus an extra one towards global is more valued and value defined as not cheap sushi our way of doing it? And so with the asset, quite a lot of tilts. And not telling you that that's a perfect amount of tilts. There is no perfect. There is a restore and it's for investors or someone more, someone less. People personal reasons or behavior reasons or whatnot. So we feel comfortable with that. It may come the case that there is a set of investor that won't weigh less and weigh more. And so we have two set of clientele and if that's the case, we may have to have more than one. And here we are. We're listening. I always say we are in the service business. And so if I provide the service and no one is interested, I don't have a service. So if there are one set of clientele and all the same, I have a service. If there are two set of clientele and I want to serve it well, I may need two things. So we're listening. We're listening to people want. We know for example that we will have to have balance of strategies. We know that. Now the question is what kind of balance of strategy was, how much fixing company equity because I kind of have 10 balance of strategies as a making sense. So I'm trying to say, what do I need? I will see. I can tell you guys are both excited about this launch. I would love to hear from each of you. What are you most excited about? I am super excited about emerging markets, to be honest. I think that the alpha that it's driven in the US, the fact that it is the largest actively managed emerging market ETF in the world. And we're bringing a Canadian version that holds the underlying directly. Again, Ben, like you mentioned, there are quite a few EM ETFs in Canada that still wrap a US listed again, two layers of withholding tax there. I think that this is an incredibly differentiated strategy in an incredibly tricky market to navigate for investors. I'm a little bit older than Patroninus, you can notice. I have three kids and someone asking which one of your kids you like. I like all of them for different reasons and I really like them a lot. So you say, what is strategy I love? I love all of them. If not, we were not going to have them. I think each strategy that we launched have a purpose and all of them together help another advisor achieve an asset allocation. Like C.R.G. It's an asset allocation. All equity is later we have balance, but it's a sort of an asset allocation that in our opinion is much better than just a market cap waiting index that doesn't consider a spectacular tone of the price the higher the weight. We can provide something that is more meaningful for the advisors and for the investors that is knowledgeable, you know, if can deal with tracking error and whatnot. So I'm very excited to be able to bring that to Canada. I didn't mention before that I was telling you I would love to be in Canada, but I don't know if we are going to be able to do a regional fee in front of the table. to do a regional fee, we're not going to do it because doing a bad job is not a good idea for anyone. And so I'm very excited to be back in Canada. I have great experience in Canada. One of the beautiful things of Canada is that people speak different languages, you know, French. And so I never feel like they might have the accent. Many people have an accent no matter what language you are. So I'm one more of the crowd. I really enjoy being in Canada. It's a pleasure interacting with Canadian advisors. And so I'm very really excited to be back here with something hopefully is of great use to all the investors. Ben and Cameron, I'd love to hear what you're most excited about too. Canadians have really embraced the asset allocation ETFs and there's even subreddits as almost these like cult followings of specific tickers like there's a subreddit called just by XQT. I think there's another one called just by VQT which are all equity tickers from Vanguard and BlackRock. So I think CAGE is a really, really exciting addition to the Canadian market where when I'm talking about how PWL invests and how I think about investing, I can point people to a single ETF just like they could with a market cap weighted globally diversified equity asset allocation ETF. I'm really excited about that. I do think it's going to have a big impact on the Canadian market. I know the people that listen to our podcast are going to be super excited because historically if they wanted to invest like we do, but doing it themselves, they had to do this kind of complicated thing, mashing up US listed in Canadian ETFs. They had to hold multiple ETFs, they had to do currency conversion themselves. So all that goes away with a product like CAGE. So that's by far what I'm most excited about. Yeah, and I look at the big arc of the industry. I think it's great. They were making such great progress on, as I said earlier, lower cost, very effective, efficient, targeted, intelligent tools that actually capture some of the research that's been going on as we all know for 60 plus years in this space of financial economics. So I think that's all great for the Canadian public. And I've been coming from a bank. I think that's also a good progress. So that's what makes me excited about this evolution. And the evolution continues, right? I think Canada's historically been slower in this evolution and it's nice to see some change. I love it. One thing for you, you know, come right next time that you have one of these events I want to show up. You guys have been so great and you're listening so great. Not only in the US, also in Europe and Canada, I want to go. I want to have a beer with all of them. So let me know. We'll do it. We were going to do a bunch of meetups this year. Was the original plan, but we decided not to do any. I don't think we've just been so busy. Next time we do a meetup, we will absolutely invite you. It'll make a big splash. Lots of people want to come to that. I'm in. We can do one in a lay. Everyone comes to the lay, man. In January of February in a lay, man. What does I like it? Awesome. Thank you guys. Thank you very much. Great to see you both. Thank you very much. Yeah, thank you guys. Really push each come back in the podcast. Thanks. Thanks, guys. 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