Exchange-traded funds offer investors low-cost access to diversified portfolios, but the growing number of products means understanding the strategy behind each one is increasingly important.
BNN Bloomberg spoke with Cole Kachur, senior investment advisor and portfolio manager at Wellington-Altus Private Wealth, about three ETFs that provide exposure to U.S. equities, technology income strategies and utilities.
Key Takeaways
- Exchange-traded funds provide low-cost access to diversified market exposure and can help investors build broad portfolios efficiently.
- CAD-hedged S&P 500 ETFs can serve as a core holding for investors seeking exposure to large U.S. companies.
- Covered-call technology ETFs generate income by selling options but typically sacrifice some upside during strong market rallies.
- Utility-focused ETFs using covered-call strategies can provide higher yields and exposure to sectors sensitive to interest rates.
- A barbell approach combining growth exposure, core index holdings and income-generating ETFs can help balance risk and return.
Read the full transcript below:
ANDREW: Let’s get to the ETF report. Our guest has three ideas in Canadian ETFs that may be an option if you’re seeking diversification in your portfolio. We’re joined by Cole Kachur, senior investment advisor and portfolio manager at Wellington-Altus Private Wealth. Cole, thanks very much indeed for joining us.
And of course, ETFs — so many, perhaps too many thousands out there — but they offer such a variety of tools.
COLE: Yeah, they can be a great access point to different markets and a useful tool in the toolbox. But like you said, when ETFs were first introduced they were a little more basic. They were basically passive investments following certain indexes.
Over the years, multiple new players have entered the sector and they’ve almost essentially become like mutual funds in a lot of ways. So I think you have to educate yourself or be careful exactly what you’re getting into because there are a lot of different nuances. Sometimes what you think you’re getting isn’t exactly what you’re getting, whether from an investment or fee perspective.
ANDREW: It’s interesting. S&P Global is out with some analysis today and they say over every time horizon from one to 10 years, more than 90 per cent of Canadian equity funds underperform the S&P/TSX composite. So it was probably a good idea, those ETF index funds.
COLE: Yeah. I mean, I think the most famous example is after the market crash in 2009, when Warren Buffett made some bets against hedge funds and active managers and the S&P handily outperformed everyone, I believe.
Stock picking is hard and volatility is paramount. In an ETF-driven world the moves are fairly significant and it’s just hard to build a portfolio of individual stocks. I think a lot of people have wised up that ETFs can get you where you need to go.
ANDREW: So you have an idea here, XSP. It’s an iShares Core S&P 500 index fund hedged to Canadian dollars. But this one, of course, you are going to be getting that big weighting in the Mag Seven stocks.
COLE: For sure. When we were talking about some ideas, I thought a barbell approach would make sense right now because there is a little bit of uncertainty in the market and there doesn’t really seem to be a clear direction.
So the XSP is kind of a core holding. You get exposure to a market-weighted S&P 500 index. The cost is basically zero — very insignificant — and you get exposure to essentially the 500 biggest companies in the U.S.
It has underperformed equal-weighted a little bit just because some of the heavy hitters haven’t done as much this year. But I think over time, if you own the market-weighted XSP or S&P 500 index, you’re participating in some of the bigger moves of the biggest companies.
ANDREW: Then you have an idea for us. It’s a tech play — the CI Tech Giants Covered Call ETF. The idea here, of course, is to give you these big U.S. tech giants but also a yield, certainly a yield on paper.
COLE: Yeah, exactly. Covered-call strategies have really come into the ETF world over the last number of years. There are varying strategies that can be used, but the underlying idea is that you’re going to generate income. In response to getting that income, you’re giving up some of the potential top-line growth.
So you’re getting exposure again to a more tech-heavy basket, but because of the volatility of those sectors the call options on them can generate more income. That’s where you see a fairly substantial distribution.
Again, it’s going to move around like the tech sector. It’s not like you’re immune to volatility — you’re just getting paid to wait. If the market goes down 10 per cent you’re clipping some coupons, and if you need cash flow you can use that while hopefully the market recalibrates itself.
ANDREW: I have to admit though I’m skeptical on a lot of these covered calls. I’m just looking at my Bloomberg screen here comparing the TSX, this particular ETF, with the Bloomberg Magnificent Seven total return index.
I’m showing that since 2023, when I think TXF was launched, it has a total return of about 90 per cent — less than half of the return, and this is both in Canadian dollars, from the Mag Seven. So you give up a lot of upside with these things.
COLE: You can, yeah. That’s where it’s important that it’s not a one-ticket solution. I think it’s part of a diversified portfolio.
For people who can stomach the moves of the market they might not be the best option. But there are a lot of people out there who don’t do very well at stomaching those moves, and having some type of cash flow or return generation can really help keep them invested.
Certainly, if you want a pure play on the returns of a given sector then covered calls aren’t the way to do it. But that’s where adding diversification and multiple approaches can help, because at any given time some are going to work better than others.
ANDREW: And then finally another idea, the Hamilton Utilities Maximizer ETF, UMAX. Again it uses covered calls to give you, on paper anyway, a big yield.
COLE: Yeah. And again that’s kind of the barbell strategy. These are just three ideas, but within a proper portfolio you’re going to have more than three holdings.
You’re probably going to have five or six ETFs as a more likely structure. So again, on one side you’re getting the tech exposure that can generate some cash flow. In the middle you’re getting the S&P 500 exposure. And on the other side you’re getting more of a utility component that is more interest-rate sensitive.
So you’re getting exposure to three different channels. You might look at it and say you like the utilities but don’t want the covered call — you just want to own the utility basket — and that’s fine.
In this scenario, I know a lot of people from my appearances on BNN Market Call are really interested in the Hamilton ETFs and specifically the high cash flow. I think Hamilton has done a good job, whether it’s the UMAX or other similar ones.
ANDREW: Did we lose Cole there? OK, sorry, we lost Cole there. Thank you very much, Cole Kachur.
I have to admit though it looks pretty similar to me that if you buy that Hamilton one you get a total return — my screen is showing about 26 per cent since 2023 — whereas if you simply bought XUT, the iShares S&P/TSX capped utilities index ETF, you would have had a return of about 40 per cent.
So these covered-call ETFs — I do wonder about them. But of course, nobody’s asking my opinion.
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This BNN Bloomberg summary and transcript of the March 5, 2026 interview with Cole Kachur are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
