CAGE:CA ETF: Wait For Outperformance Before Buying

The key issue is not product quality but market structure: in a low-liquidity ETF ecosystem, a new entrant with a near-clone mandate has to pay a permanent “distribution tax” to gather assets, and that usually shows up first in spreads and trading friction rather than headline performance. That creates a self-reinforcing loop: weaker secondary-market experience depresses advisor adoption, which keeps primary flows light, which keeps spreads wide. In this setup, the highest-conviction winner is not the issuer but incumbent global-allocation ETFs that already sit inside model portfolios and can absorb marginal flows without needing to win a fresh mandate.

The second-order effect is fee compression pressure on the whole category. If a higher-fee near-replica can’t demonstrate either better risk-adjusted returns or meaningfully tighter execution, the market will increasingly treat it as an implementation risk, not an alpha source. Over the next 1-3 months, the main catalyst is simple flow momentum: one or two weakly handled trading sessions or continued underperformance versus peers can lock in a liquidity discount that is hard to reverse without a large seed or a major distribution push.

The contrarian view is that the current skepticism may be excessive if the sponsor is willing to subsidize spreads or seed assets aggressively. In thin Canadian ETF markets, assets can inflect quickly once a product gets into a few dealer shelves; the problem is that the burden of proof is high, and investors will likely demand several months of clean trading before assigning it a real place in portfolios. Until then, the burden is on the new fund to prove it is more than a packaging exercise.