Insights: Other Financials

Financials: Does COVID-19 Represent a Growth Scare, Credit Event or Crisis?

Since we launched our first ETF in January 2016, there have been four significant macro corrections in four years. None of those large and painful corrections represented a crisis, insofar as the declines did not represent a threat to the solvency of the financial sector, either from a lack of liquidity or the destruction of capital. Rather, they were related to the market rapidly (and, in…

Hamilton Global Financials Yield ETF (HFY): Strong Q4 Closes out an Excellent Two Years

For the quarter ended December 31, 2019, the Hamilton Global Financials Yield ETF (HFY) returned 4.1% including distributions. In 2019, HFY returned 21.6%, beating the Canadian banks by 750 bps[1]. It also beat its benchmark, the KBW Financial Sector Dividend Yield Total Return Index (in CAD), which returned 15.0%. Note to Reader: This Insight includes references to certain Hamilton ETFs that were active at the time of writing.…

HFA: Identical Return to the Canadian Banks with Much Lower Volatility (and Lower Correlations)

The Hamilton Australian Financials Yield ETF (HFA) recently celebrated its one-year anniversary. Although the global financials and the Canadian banks experienced significant volatility since its launch in December 2018, HFA has produced consistent monthly returns and dividends as well as identical returns to the Canadian banks, but with much lower volatility (and relatively low correlations). Note to Reader: This Insight includes references to certain Hamilton ETFs…

Australian Financials: History of Strong/Stable Dividend Growth

The Australian financial sector is among the highest quality and strongest in the world (and very similar to that of Canada). Moreover, Australia is one of the wealthiest countries in the world with GDP/capita nearly 20% higher than that of Canada. It is also forecast to be one of the world’s fastest growing developed economies in 2020 (at 2.4%), providing a supportive backdrop to the financial…

Notes from New York: Cards, Payments and Financial Technology Meetings

We met the management teams of over a dozen payments, cards, exchanges and other related companies in the rapidly growing financial technology sector[1] in New York. The financial technology sector (“Fin-Tech”) is expected to continue to benefit from multiple structural tailwinds including the growth of e-commerce and growing technology adoption. However, high competitive intensity, rapidly evolving consumer preferences and a wide variety of business models (including…

Notes from India: Financials Poised to Benefit from World’s Fastest Growing Economy

We met the management teams of over a dozen Indian banks, insurers and asset managers in the financial capital of Mumbai, India in December. With real GDP growth of over 7% over the past decade, India is one of the largest emerging markets and forecast to be the fastest growing major economy in 2019. Not surprisingly, the management teams we met were very upbeat. Exposure to…

Australian Financials: Regulatory Clarity Arrives

The Hamilton Capital Australian Financials Yield ETF (HFA) was launched in December 2018, with a targeted yield of 6.5% or higher paid monthly (aided by covered calls). The Australian financials have a history of long-term outperformance versus the Canadian financials with lower volatility. In fact, the Australian banks outperformed the Canadian banks during the global financial crisis. One main reason Australian financials have consistently outperformed their…

U.S. Financials | Analysts vs. the Markets (as Fundamentals/Stock Prices Diverge)

This has been a tough month for the financials, particularly banks. What made this correction unusual is that throughout October, the financials continued to post very high earnings growth, and with minimal downgrades in estimates/target prices, the ingredients for a sharp sell-off were largely absent. Of the 270 financial services stocks covered by the U.S. broker-dealer, Sandler O’Neill + Partners (SOP), over 70% met or beat…

Global Exchanges and E-Brokers: favourable secular and cyclical themes

We met the management of over a dozen global exchanges and e-brokers at a recent conference in New York. Global exchanges and e-brokers have benefitted from secular, regulatory and cyclical tailwinds over the past decade, which has resulted in robust earnings growth and driven strong stock outperformance.  The Hamilton Capital Global Financials Yield ETF (HFY) which is outperforming its benchmark by 270 bps since inception and has a…

Are REITs Set to Underperform the Financials?

We are pleased to announce the launch of the Hamilton Capital Global Financials Yield ETF (HFY), which will begin trading on the TSX on Tuesday, February 7th. The objective of the ETF is to offer attractive distribution potential. Put differently, our aspiration is for the ETF to have “REIT-like yields, but with positive rate sensitivity”. Although REITs were recently separated from certain financial services indices (for…

Business Development Corps: Notes from NYC Field Trip

We recently travelled to New York City to meet with executives from a group of business development companies (“BDCs”), a diverse category of “other financials” focused on yields. There are over 30 publicly traded BDCs in our investable universe, with market capitalizations ranging from ~$100 mln to several billion dollars. Yields for these financials are generally over 8%.

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