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Evolve US Banks Enhanced Yield Fund (CALL.B)
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Evolve US Banks Enhanced Yield Fund (CALL)
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Evolve US Banks Enhanced Yield Fund (CALL.U)
Q: I have an enigma for you….
CALL.TO closed at C$4.13 today while CALL.U.TO closed at US$16.01.
If these are identical shares, both listed in Toronto, then the price difference should be the exchange rate - correct?
However, the equivalent USD shares are far more expensive than the CAD shares. This is the puzzle.
Could you explain this?
Which is the better buy, or would you not recommend either one?
CALL.TO closed at C$4.13 today while CALL.U.TO closed at US$16.01.
If these are identical shares, both listed in Toronto, then the price difference should be the exchange rate - correct?
However, the equivalent USD shares are far more expensive than the CAD shares. This is the puzzle.
Could you explain this?
Which is the better buy, or would you not recommend either one?
5i Research Answer:
CALL is hedged to CAD, while CALL.U is technically unhedged and simply denominated in USD. As a result of the CAD hedge function, CALL uses forward contracts which have roll over costs and interest rate expenses, and generally the higher US interest rate relative to Canadian rates has increased the costs of hedging. Since the inception of both funds, CALL.U has returned 28% while CALL has returned 15%. If we convert CALL.U to CAD, the outperformance is even greater.
On the other hand, the unhedged version, CALL.B, has returned 37% since inception, outperforming CALL and CALL.U, but when we convert the returns of CALL.U to CAD, it is similar to CALL.B.
Overall, we would prefer CALL.B or CALL.U, depending on if an investor has USD or CAD.