One Of Canada's Fastest Growing ETF Issuers More Than Doubled Its AUM Amid A Market Downturn — Evolve CEO Shares The Secret to Its Success

Founded in 2017, Evolve has quickly become one of Canada’s fastest-growing ETF issuers. In the past year alone, the company grew from $2 billion in assets under management (AUM) at the start of 2022 to $5.6 billion today. Raj Lala, the President and CEO of Evolve, is incredibly proud of that growth. “In a year where most people had declines in assets because markets were down significantly, we were one of the few firms that had some really strong up growth,” the Evolve CEO said. “Out of the top 15 ETF issuers in Canada, we had the highest growth rate.”

Lala credits that rapid growth to the company’s diversified platform of thematic ETFs that cater to the unique appetites of the Canadian investors that Evolve caters to. Here’s a closer look at Evolve’s strategy for building ETFs and how it’s managed to achieve the growth it has in a market as challenging as this one.

Evolve Delivers Innovative, Relevant ETFs Tailored To The Canadian Market

When Evolve was getting ready to launch its first ETF, its goal was to find gaps in the Canadian ETF  market that the emerging ETF issuer could fill. One way Evolve finds those gaps is by keeping tabs on what’s happening in other markets around the world to spot trends that could work in Canada. 

“Investor priorities and appetites [in Canada] are very different than U.S. markets,” Lala explained. “So we have to make sure that whatever that strategy is that seems to be working in the U.S. or Europe or other parts of the world, is that actually portable to the Canadian investor market? That’s resulted in many Canadian firsts.”

Those firsts include Canada’s first multi-cryptocurrency ETF, the Evolve Cryptocurrencies ETF ETC and the country’s first eGaming and eSports ETF, Evolve E-Gaming Index ETF HERO. It also includes the Evolve Cyber Security CYBR fund, Canada’s first cybersecurity ETF and the first ETF launched by Evolve back in 2017. Today, CYBR has become the largest cybersecurity ETF on the market. 

Its Automobile Innovation Index Fund CARS is another prime example. Launched in September 2017, it wasn’t just the first ETF in Canada but the first in the world to focus on the autonomous, electric, shared model of the car and Evolve launched it at a time when Tesla was on the verge of bankruptcy. “Everybody thought that [Tesla was] going to go bankrupt and nobody believed that the electrification of the car was going to catch on,” Lala recalled. 

By the time electric vehicles and other disruptive car tech started gaining a real foothold in the market, the Evolve ETF took off. “As the market supports you in terms of market return, it supports the thesis. That’s when you drive investor demand,” Lala said.

The inspiration for disruptive tech ETFs like those stems from the company’s mission to deliver funds that are relevant and relatable for Canadian investors. “We believed that a lot of investors wanted to express views in specific themes that intersected in their world, in areas like cybersecurity, cloud computing, eGaming, and so on,” Lala said. 

Once Evolve finds a gap in the Canadian market, the next step is to build the fund which includes key decisions around whether to design it as an actively-managed fund or a passive index-based ETF and whether to use equal weighting, market cap weighting, a smart beta approach, and any other features to build the most effective ETF around that theme. “It’s a part art, part science strategy,” says Evolve’s CEO. 

Evolve Says Diversification Has Helped It Soar In A Challenging Market 

Where other ETF issuers focus on narrower niches, Evolve opts for diversification and credits much of the company’s staying power and rapid growth to its diverse portfolio of 24 funds. 

“A few years ago, there were a couple of ETF issuers that were a similar size to us. One was focused around disruptive technology exclusively and the other was focused around crypto exclusively. We were all clustered around this $1.2 to $1.5 billion in assets under management,” recalled Lala. “Today, both of those companies have less than $200 million in assets under management while we have $5.6 billion.”

In the years since Evolve launched its first ETF, the funds driving its growth have shifted. “In the first year, a lot of our success came from Canadian Preferred Share Funds,” said Lala. “The next couple of years, it came from disruptive technology and cryptocurrency.”

This past year, Evolve’s cash alternative ETFs have become major drivers of growth for the company. The High Interest Savings Account HISA fund and U.S. High Interest Savings Account HISU fund each invest primarily in high-interest deposit accounts to give investors a way to gain exposure to high-interest savings account while maintaining liquidity. 

In the midst of an economic downturn, skyrocketing inflation, and some of the highest interest rates seen in the last 20 years, cash has suddenly become a meaningful way to generate returns in an otherwise tumultuous market. The HISA and HISU funds are another example of how diversification has paid off for Evolve. “We’ve always had products that will resonate no matter where we are in the market cycle,” Lala said.

Learn more about Evolve ETFs on their website.

Featured photo by Yan Krukau on Pexels

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