Product news: TDAM fights inflation with commodities pool

TD Asset Management is betting on a new commodities super-cycle with an alternative product designed as an inflation hedge.

The TD Alternative Commodities Pool provides exposure to a range of commodities — from oil and gas to precious metals to grains and livestock — using derivatives.

TDAM says that exposure can provide protection against inflation as the prices of commodities increase, while also offering low correlation to stocks and bonds.

The asset manager also believes we’re entering a new commodities “super-cycle”: a period when supply doesn’t meet demand, leaving tight inventories and price increases favourable to investors. TDAM pointed to the long bear market in commodities followed by last year’s strong returns. The combination of a “generational” demand shock and extended underinvestment has created these favourable conditions, it said.

The pool’s risk rating is medium, with management fees at 1.70% for the Advisor Series and 0.70% for the F Series. TDAM said it’s waiving 35 basis points of the management fee until the end of 2024.

Evolve launching covered-call bond ETF

Evolve Funds Group Inc. filed the final prospectus for a covered-call bond fund, which it plans to launch Oct. 4 on the Toronto Stock Exchange.

The Evolve Enhanced Yield Bond Fund (TSX: BOND) seeks to provide enhanced and tax-efficient yield on fixed income with some downside protection. (Covered-call premiums are taxed as capital gains rather than interest income.)

“Market conditions over the past year have been particularly challenging for yield strategies, leading many investors to seek new solutions,” Evolve president and CEO Raj Lala said in a release.

The fund will invest in fixed income ETFs issued in Canada and the U.S., primarily in long-term U.S. Treasury ETFs. The level of covered-call option writing will depend on market conditions, beginning with options on half the portfolio. The ETF is targeting a 10% yield.

Hamilton Capital Partners Inc. released the first covered-call bond ETF earlier this month.

Like Hamilton, the Evolve ETF will have a management fee of 0.45%, but Evolve said it’s waiving that fee until March 31, 2024. The ETF provider used the same approach in the competitive money-market space earlier this year.

The enhanced yield bond ETF will also come in U.S. and Canadian dollar unhedged versions.

CIBC expands CDR offering

CIBC has added six new Canadian depositary receipts to its lineup on Cboe Canada.

The new CDRs — which provide exposure to large U.S companies while hedging currency risk — are for software company Adobe Inc., semiconductor manufacturer Broadcom Inc., equipment manufacturer Caterpillar Inc., pharmaceutical company Eli Lilly and Co., health-care firm Johnson & Johnson, and defence company RTX Corporation.

From five CDRs launched in the summer of 2021, CIBC’s lineup has expanded to 47, with assets of $2.7 billion.

Closing funds

Toronto-based Sprott Asset Management LP is closing the Sprott ESG Gold ETF (NYSE Arca: SESG). Launched just over a year ago, the fund sourced gold from mines the met certain ESG criteria. Set to close Nov. 9, the fund accumulated only about US$15 million in assets.

Meanwhile, Starlight Investments Capital LP is closing the Starlight Enhanced Yield Fund and the Starlight Canadian Financial Services Covered Call Fund, citing the funds’ small asset size and limited demand. The termination date is Nov. 17.