VISION 2026: Innovation shaping advisor portfolios - Étienne Joncas Bouchard, Brendan Sims

Glen Davidson: [00:00:00] Welcome back, everyone. I just want you to know that if there was a sock competition today Brendan Sims would win. What's the story? 

Brendan Sims: [00:00:08] Thank you, Glen. It was actually a few months ago in Arizona, you made mention I should bring my young newborn on stage. I figured I couldn't quite do that.

Glen Davidson: [00:00:16] But I meant him, not your socks.

Brendan Sims: [00:00:18] I did the closest thing to. Anyways, we won't let that detract from the session at hand but thank you for bringing that up.

Glen Davidson: [00:00:24] I'm really glad we're doing this session with you to talk about alts, with you to talk, Étienne, about ETFs. These are important asset classes, they're important vehicles and they are something that some of you may use, some of you may not, but your clients may ask regardless so it's important to discuss these. Alternative strategies were really something that were for institutional investors years ago and now they're really available and developing at an incredible pace for everyone. We're going to get into that. When it comes to ETFs, the Canadian ETF industry had a record-setting year last year. Pretty amazing to see the flows, the advertising from all companies, Fidelity  being the best, all over the place and yet on a recent episode of Jeopardy the contestants didn't know what ETFs stood for. That's strange, isn't it?

Étienne Joncas-Bouchard: [00:01:11] It is quite strange. I think it's become a vehicle that's increasingly popular. I think in our intros there, which were quite something, that was pretty cool, we saw that our team on the ETF side conducted more than ... instead of 900 a thousand meetings total last year with advisors. Albeit it's become such a big part of the Canadian asset management industry there's still a lot of education to do. I think for advisors, even the session that we're doing today, this is all stuff that you can bring back to your investors and share your expertise on and help educate them into the different types of ETFs that are out there, the trends that we've seen and just really the depth and richness of product that's available. The ETF vehicle has really become the engine of innovation, if you will, in the asset management industry. That's especially true on the alternative side now. It's been true, I think, for the better part of the last decade and that's really what we've tried to hone in on, obviously, at Fidelity being a newer player when you look at the greater scheme of things, first ETF being launched in the '90s. We've really focused on that innovation as well.

Glen Davidson: [00:02:20] Now, you talked about thousands of meetings, or whatever the number was that was on the intro, and tens of thousands of advisors have been exposed to the two of you and your teams through events like this, webcasts, podcasts and so on throughout the last few years. It's pretty amazing to see that penetration. Now, the teams are also growing as well. Étienne, your group is four and Brendan, yours is two so far. Why is it important that this group grows? Brendan, what is it, how are you getting out there talking to advisors?

Brendan Sims: [00:02:51] I think the frequency and nature of how we're engaging with advisors and thus the end investor, the questions that are being asked of advisors on a regular basis about ETFs, about alternatives, what I would say is these might not be an integral part of your business today at present but I can promise you they're questions that are going to be asked by investors throughout the year, whether it's opening up a newspaper, if dare we say that, with the physical gesture, or just going on your phone and reading an article these days, it is where the questions are being asked and I think that it's a space that needs more attention. To Étienne's earlier point education is crucial. This is a moving target with respect to the innovation of products that we're rolling out. We are launching funds that sell stock long and short in a daily liquid exchange-traded product. There is a degree of complexity to that that we need to sort of keep up to speed with. I think that's partially from an educational standpoint but also a product standpoint, wanting to dive a layer deeper to make sure that from a KYP standpoint we best understand the products which we're placing capital in and we compare it across the broader competitive landscape. That's what a lot of our meeting time is spent on.

Glen Davidson: [00:03:50] Étienne, would you concur?

Étienne Joncas-Bouchard: [00:03:51] Absolutely. We added three people to our team last year and, really, the objective is to work hand-in-hand with our sales teams that everybody in this room interacts with. Whether it's on these kind of bigger stages, obviously, we can share our insights but, really, kind of, I guess our true value-add is you're able to reach out to your wholesaler and ask them, hey, can I get Brendan in a meeting, can I get Étienne in a meeting or Vince, Mark, etc., I can name the rest of the team. Our objective is not only to educate on product but it's also to say how can we best use these and what is the research that we're doing behind the scenes that can help you make your decisions in your portfolios. We've got more than 50 ETFs now. Brendan, we've got--

Brendan Sims: [00:04:29] We'll have nine alternatives products.

Étienne Joncas-Bouchard: [00:04:33] --nine alternatives tomorrow. There's all these different solutions and they're all very different and unique. The end game that we've, well, there's no end game, obviously, because we continue to launch products at Fidelity at all times, but really was to have also asset allocation solutions. We saw on the screen the Fidelity All-in-Ones, for example, the multi-alt equity that we have on the alt side, we have these packages now that are simpler, one-ticket solutions but there's so many different things that we could look at to help you enhance your portfolios.

Glen Davidson: [00:05:00] Brendan, let's look at a quick summary of 2025 from an alt standpoint.

Brendan Sims: [00:05:04] The space grew rampantly, I would say nearly a 50% growth rate for the category. We're still parsing through the year-end numbers to get the finalized number but I would say that the space has sort of finished the year up somewhere right around the $70 billion mark. While we're not at as large of an AUM base as the broader ETF universe alternatives are very niche. I think it's a space that continues to grow at a very high growth rate. That's categorized by frequency of new launches. I keep up to speed with what other competitors are doing and how frequently new products are coming forward. It's a full-time job in and of itself to figure out what's being brought forward, how these solutions are managed and, really, how they're doing this. While we're working on something a competitor might be working on something. It is a net new discovery zone for the product and innovation that we can bring forward. Regulators changed the rules about six years ago with the innovations we can do, investing both long, short, use of derivatives for non-hedging purposes or more speculative nature. There's a ton of flexibility in the liquid alt framework to give quote-unquote, hedge fund-like solutions with full transparency, daily liquidity and lower cost.

Glen Davidson: [00:06:06] Do you think it's fair to call alternative assets alternative assets? And I mean that in that there's so much popularity now and breadth, I wonder if we're going to get to a point where they're just another asset class.

Brendan Sims: [00:06:17] That's just it, right? At present we have in liquid alt category as well as the private category, both distinct from one another. Within the liquid category we divide it five different ways. There was just a recent discussion as to what should be in which category and why. I think that's representative of the space. We're still in the very early innings of what products are available. For example, Morningstar is still reluctant to place their well-known star ratings on these products because there are so few two products that are like to one another. They have a really challenging time in doing that.

Glen Davidson: [00:06:49] We'll get there. Étienne, quick summary of '25.

Étienne Joncas-Bouchard: [00:06:52] The Canadian ETF industry had an absolutely phenomenal year in 2025 and it represented about 64% higher flows relative to the previous record year. We're talking about $125 billion in net new assets coming into the Canadian ETF industry. I guess just a few numbers to put that into perspective that caught my attention, the total number of assets in ETFs is now about 22% of the entire fund industry in Canada, including mutual funds and ETFs. That was less than 10% back when I started in 2018. It's more than doubled since 2018 so I think that's just showing the sheer growth that we've seen which is higher than 20% annualized over the last 10 years. I think to your point that you mentioned earlier, whether you use ETFs in your portfolios currently, or ETF funds which is another thing that we always like to mention, we're developing solutions, we're not necessarily developing a vehicle which a lot of our ETFs for the large majority are available in series B, series F as well.

[00:07:50] A couple other points that I'd mention in terms of where the money's going in terms of buckets. I think the number one theme was demand for international or demand for outside of North America. International equities definitely led the way. Performance is one thing but there's also sentiment. I think there was maybe lower allocations in a lot of client portfolios to international stocks due to the relative performance of the past decade. We really saw that up throughout the year. A couple of other things, levered products, kind of a new thing. Those are coming slightly under heat south of the border with the SEC stepping in in terms of leverage, the amount of leverage you can put on a single stock, a single sector. We did see single stock ETFs come in new which is something that's quite interesting category.

Glen Davidson: [00:08:36] Let me ask you, what's Fidelity's view on that because that is something that comes under scrutiny in the United States. There's single stock levered ETFs, aren't there, is Fidelity going that direction? What's the take?

Étienne Joncas-Bouchard: [00:08:49] It's a good question. We're not there now. It's an area, I mean, any time you see more than a billion dollars come in in a span of a quarter, which was what happened last year at the end of Q4, you've got to think of, first of all, who's buying this? Why are they using them? I think a lot of it has to do with the demand that we saw. A lot of it has to with the risk appetite that we saw from investors last year, which is the other big theme, I think. If you look at where the flows were going it was on risk-on type parts of the market. Obviously, if you're willing to buy a single stock at three times leverage you've got to be pretty bullish. I think there's somewhat of a cyclical thing to it. What we've found, though, is the incremental trades and the size of the trades that we saw in those products was so small that it's very indicative of demand from discount brokerage accounts and individual investors. We are an advisor-centric business. More than 95% of our assets are with advisors, that's our estimate anyways. To be continued, I guess.

Glen Davidson: [00:09:48] Brendan, for the alternative strategists, you included, when you're talking to advisors what sort of conversations across the country are coming up now?

Brendan Sims: [00:09:56] I already touched on the competitive landscape, contrasting our products with others, net exposures, where we're going on a country geographic basis, how are we different, security selection, sector, the research that goes into these products. When you're talking about a long/short hedge fund-like vehicle or even a 100 long, 100 short , like a market neutral type approach, I think the research advantage really matters. You amplify your exposure to the firm's security selection that you're subscribing to. I think that looking to where the puck's going with respect to research, the world around us is changing so fast. Did I hear on the feed earlier, we heard the 10 years of 2026 so far or something along those lines. It's been a busy start. We're 28 days in, a lot's going on. I think just unpacking the world around us, should we de-risk portfolios? We have a lot of people that have a heavy hand in, dare we say, US, infotech-heavy, large-cap, Mag-7-like names, how do we de-risk the portion of a portfolio that has done so, so well? Is it stocks? Is it bonds? Is it alternative exposures? I think that more and more people are turning to that latter of the group, turning to alternatives amidst the uncertainty and positive stock-bond relationship for how these things move in tandem with one another.

Glen Davidson: [00:11:04] For a sleeve within a portfolio.

Brendan Sims: [00:11:06] Absolutely. What that sleeve might mean to one person could be very different. That's a common question we get, where should I start? Is it 10? Is it 20? How should I build out this sleeve? To which my response is what's the goal and objective of this sleeve, right? Are you still striving for a growth-oriented portfolio or are we looking to get really conservative because we can do both those things.

Glen Davidson: [00:11:24] Étienne, how are the conversations with advisors as we look at the last quarter even or this month so far.

Étienne Joncas-Bouchard: [00:11:30] Last year there was a couple really, really strong themes. When I peel back kind of the onion, if you will, and look under the hood of a lot of our ETFs and I look at, say, our factor-based ETFs which are the core allocations in our All-in-Ones, it's always something different that's driving the performance whether it's in an individual factor like a value factor or in our All-in-One ETF portfolios. Last year I think that some of the key drivers were number one, obviously, where were you positioned in the materials sector, were you overweight or underweight precious metals. That had an impact on not only Canadian equities, it had an impact on US as well as international equities. That was one. AI sensitivity, do you have stocks that are either directly tied to AI or kind of beneficiaries on a more granular level, which there's a bunch of examples of stocks that we held in some of our ETFs that wouldn't come up as the typical AI name but were beneficiaries. I think a lot of people in the room might know them now, Caterpillar being an example. You think Caterpillar, why is an equipment manufacturer benefiting? All of a sudden you're realizing that they're going to be heavily utilized to build out a lot of the infrastructure that's necessary for the growth and demand for AI and computing. Those are two main ones.

[00:12:42] I'd say the third one is just broader diversification. I mentioned international equity demand but there's been a lot of questions around should I be reducing my US exposure tied, obviously, to a weakened US dollar. These are the three main conversations that we've had. I think going into this year a lot of those stay true. Now, I think when we look at attribution for the last year a couple of those are already coming up to mind where we've seen four sigma events in silver prices. We've seen today some very positive and bullish news around AI and the mega-cap tech names. It seems like momentum has somewhat continued to start the year but, really, for us it's preparing what are other options to help potentially de-risk. To the same point that Brendan just mentioned, this will run until it runs but what are options that we like right now to offset some of those risks. There are factors like value that really come to mind right now.

Glen Davidson: [00:13:45] Brendan, you must be getting asked occasionally as well if we're in an AI bubble where an alternative fund might be something that someone wants a larger position in if that's the case.

Brendan Sims: [00:13:53] That's a great question.

Glen Davidson: [00:13:53] Not that we know but...

Brendan Sims: [00:13:55] By conventional definition I would say that we're likely not in a sense that the names that are driving a lot of this growth are highly cash generative and highly profitable. With that said, if we just imagine the world as one big bubble with many bubbles within, you can have areas of excess or exuberance at the same time as ongoing recessions. Different areas of the market bottom before others, things are always going in and out. We had areas of market that rhymed with AI, rhymed with quantum compute that sold off 50 to 70% in Q4. These were names that are not that big. These are names that went from a billion in size to eight billion in sizes, that were down 60% in 30, 40 days in October. Didn't notice, and it also didn't cause a systematic sort of ripple effect, if you would. The answer to the question are we in a bubble, the answer's likely not. I'm not here to say yes or no.

[00:14:46]  I think the main message is that different areas of the economy can be in different cycles at different times. GTA housing for that matter. The market and the economy are two very distinct components, one often leading the other. With that said, I would say it's a question that is most frequently asked and I think we have to manage around it. One last thing is earnings growth in the US, estimated 15%. That's the eye on the prize in a sense that if you told me that 28 days into the year we would have digested the news cycle which we have thus far, I'd say no way, we're not going to be near 7,000. There's a lot of uncertainty, a lot of geopolitical risk out there. I think that we're seeing that in the metal space, commodities, are we at the beginning of a commodity supercycle. Time will tell but I think this is just the market digesting news. We'll see where we go from here.

Étienne Joncas-Bouchard: [00:15:33] I'll just add one thing with regards to what Brendan's mentioning, stock selection was super important last year. You could have been overweight the right sector and still got it wrong. You could've been overweight materials in your portfolio and still underperform if you didn't own precious metals. You could've have been in comm services and owned some online retailers that fall into that space and have underperformed. Whether that's through a vehicle in our ETFs that we have with on the factor side that will look at fundamentals, not so much just the size. It allows you to generate alpha over time by having good stock selection, whether you're on an active manager or on a factor side. It's been challenging to outperform broad market indices over the past couple of years because of the momentum and the largest names in the index. What we saw last year is really signs of that slowly turning, especially in Q4 where a lot of names like idiosyncratic stock ideas that worked because they delivered on their promises on earnings growth, they delivered on improving their balance sheets, for example, and etc. I think it's this year one of the themes that likely arises is it might be a better year for where we live which is active management.

Glen Davidson: [00:16:48] That makes a lot of sense. I'm gonna stay with you, All-in-Ones. I know you're very proud and excited about how they've done with Fidelity and in the industry. Please talk about those.

Étienne Joncas-Bouchard: [00:16:58] They've very quickly become our flagship products here at Fidelity. To take a step back, our All-in-One ETF portfolios are strategically managed, globally diversified asset allocation products that we have various risk profiles ranging from 100% fixed income all the way to 100% equity. They've been extremely successful from a flows perspective, extremely successful from a performance perspective. Really, the idea in building these portfolios was taking what we had in great solutions and building the best diversified portfolio with the help, obviously, mainly of our equity factors which, you know, from things that we've talked about in the past equity factors work over time, not all the time.

Glen Davidson: [00:17:44] Can you, just for me, define factors, please.

Étienne Joncas-Bouchard: [00:17:45] Absolutely. A factor strategy is, basically, a quant screen where we look at fundamentals to pick stocks that have historically shown to outperform the broad benchmark. That could come in the form of value. If we continually pick stocks that trade at a discount to the broad market that should work over time. If we continually pick stocks that have higher than average return on invested capital, higher free cash flow margins, high quality, you tend to outperform over time, As I just mentioned, they work overtime not all the time, hence timing these factors is very critical because they are cyclical. The beautiful thing about the All-in-Ones is we do that for you. We package them together so that you can benefit from all of them over time and not try to tactically maneuver your way throughout a given investment cycle. That's been clearly evident so far in the performance that we've seen in the portfolio since we've launched them in 2021, where every calendar year it's a different part of the portfolio that's additive. In any good asset allocation product there's something that's not working. If everything worked at the same time that's where you don't really have, I think, a properly diversified portfolio.

[00:18:53] Just in terms of numbers, obviously, they represent about 65 to 70% of our flows and about half of them are in the fund version, half of them in the ETF version. These are being more and more utilized, I think, by every different type of advisor that's here in the room and used in various different ways. A lot of advisors use them as like I have a small registered account and I don't want to to build out something very complex, well, this is a great one-ticket solution. We're also seeing discretionary advisors using our All-in-One equity ETF as a great core global allocation in their model. We're extremely happy with them. I'm happy to dive a bit more but high level these are fully diversified, systematically managed and strategic asset allocation.

Glen Davidson: [00:19:39] That's quite the array on that slide. They will not be static, they will enhance over time as we see the need to put other asset classes within.

Étienne Joncas-Bouchard: [00:19:47] Albeit we're not making tactical asset allocation calls we do have risk parameters so any time something deviates by 5% from the neutral asset mix we will rebalance. We do allow for drift because that's how you can benefit from momentum in certain areas of the market. To your point, just because we're not tactically moving in the pieces underneath doesn't mean we're not trying to enhance them. Last year was a great example. In January we added two new fixed income mandates that are more US-centric because we felt that was an opportunity to better the diversification of the portfolio. We're constantly reviewing them. We're making sure that they're still relevant in current environment. For the most part what you're buying is what you're going to get.

Glen Davidson: [00:20:32] Good stuff. Brendan, if you could talk about the Multi-Alt Equity Fund, please.

Brendan Sims: [00:20:35] It's a mouthful and you got it right. Multi-Alt Equity, it's a fund that we launched a short while ago. What I would say is it's in a similar fashion combining the best-in-breed capabilities across our broader alt lineup into a one-ticket solution. I'm not going to pretend that I know all the battles on the other side of the table but I understand from my many conversations that KYP and KYC is a mountainous hurdle, if you would, with respect to keeping up. I think that it is a tool to assist with that auto rebalancing, with that small ability for the components to drift, a lower risk, low to medium risk by prospectus. Again, please check with your dealer for respective ratings. It's a solution that encompasses best-of-breed. We have Long/Short Alternative with Dave Way, we have Brett Dley's Market Neutral, Dan Dupont's Global Value Long/Short, Reetu Kumra on Canadian Long/Short, and then a tiny, tiny allocation of 2 1/2% to digital assets.

[00:21:25] There are five underlying building blocks that comprise our Multi-Alt Equity solution in which, I would say, the genesis of this solution was actually brought about many years ago when we first entered the alts  landscape. Many advisors came to us and they asked, can you provide a multi-strategy solution so that I can have a one-ticket way to enter the alt landscape? For the advisors that are saying, hey, I'm not presently in alternatives, I'm just at the tip of the iceberg for doing my homework,  where do I start? We're happy to meet you right there with a solution. It's a great way to start, build out a diversified sleeve that you're going to designate, whether it be a larger client account or maybe across the book of business, a one-ticket start to a diversified alternative. I would highlight the name does say equity. Again, these are all equity building blocks. We leave the runway open. Maybe one day we utilize long/short capacity that utilizes bond instruments in a different way to get more defensive. I think we have a ton of flexibility with what we can offer and we're just offering using sort of the best in our lineup to put this together.

Glen Davidson: [00:22:24] This alt research is done from you and the Canadian team but it's also done around the world. Can you just talk about the power of research that goes into development of these solutions?

Brendan Sims: [00:22:34] Boots on the ground globally. I think of a few of the solutions that do offer more of a global scale and a long/short capacity. We've long heard about international markets being less efficient than their US counterparts which we know to be extremely efficient and all of your work over index construction would definitely support that. I do think that as you go global and as you go international there's greater opportunity to exploit information, asymmetries or inefficiencies if you would, but those opportunities are alive and well here in the Canadian-US landscape. I think that boots on the ground matters. I think the scale of research, accessing third-party research is crucial. We can subscribe to third-party databases for trade, for flow data. We have access to our designated short desk that is based out of London, UK. There are a number of different resources that our PMs sitting here, just up the street on the ninth floor can tap into that not every shop on the street, quite candidly, could.

Glen Davidson: [00:23:29] You have a designated short desk.

Brendan Sims: [00:23:32] It would be a team that trades, borrow stock, trade short.

Glen Davidson: [00:23:37] Étienne, what would you like to see on the ETF side? You talked a little bit about do we ever go down the path of using leverage but what would you also like to see on the ETF space?

Étienne Joncas-Bouchard: [00:23:49] There's 364 new ETFs launched in Canada this year. Put that in perspective, it took 20 years to launch that many products. There's a point where from an asset management perspective, you have to be very diligent and precise into ... if we're launching something there has to be a very direct purpose and it has to be relevant for everyone in this room. There's not one specific thing that comes top of mind, to be quite honest. I'm extremely happy with the lineup that we have and it's continuing to enhance the solutions that work. It's also to make sure that we're best-in-class, best-in-breed, which I truly think we are. I wouldn't say that there's something that's screaming that we need to try this or we need do something out of the blue. I think we've built quite an extensive lineup right now but, obviously, things change as well, right?

Glen Davidson: [00:24:47] And you're not done yet.

Étienne Joncas-Bouchard: [00:24:47] We're never done.

Glen Davidson: [00:24:47] I just want to pick up on the launches that you talked about. Something I read recently said that the majority, it may have been two-thirds, were active whereas we always thought of ETFs in the past, I think you mentioned 1990 prior, it was passive.

Étienne Joncas-Bouchard: [00:25:00] That's a great point and maybe, actually, I should have thought about that one. Good for bringing it up.

Glen Davidson: [00:25:04] This is why we work together.

Étienne Joncas-Bouchard: [00:25:07] Over the past couple of years we've launched more and more of our mutual funds as an ETF series. For those that are less familiar with that concept, literally we are setting up a new series in the form of an ETF ticker for an existing product. Now you can have more choice. Similarly, how we offer some of our ETFs and funds we want to give the flexibility to you as advisors to [indecipherable] Global Innovators in the vehicle of your choosing. That, I think, will continue to be developed. To your point, there's now more listed active ETFs in Canada than passive ETFs. Obviously, there's only so many different indices you can launch but it's just showing that I think a lot of asset managers, especially Fidelity where we have our strength there, we can really compete in that area and provide some really interesting active solutions in an ETF vehicle.

Brendan Sims: [00:26:00] I just wanted to add, it was a misstep on my part. You talked about research, talked about launching new products in blind spots in our lineup. Tomorrow we are launching a global long/short fund. It's the Fidelity Opportunities Long/Short Fund. Stay tuned for more information tomorrow on that that would tap into all that great international research that we discussed.

Glen Davidson: [00:26:16] You got it in perfect, it's 11:00. Étienne, Brendan, thank you so much. It was a pleasure.