GS Gregory Sweet
CM Craig Maddock
WB Wes Blight
VO Voiceover
00:00:00
GS Welcome back to Let's Talk Investing. Today, we're looking at the evolution of the Scotia Essentials portfolios and what the enhancements mean for investors. The changes are now live. As of October 30th, 2026, the portfolios were renamed the Scotia Essentials ETF portfolios to better reflect their ETF-focused design. As of November 1st, 2026, the announced management fee reductions took effect for select series of the Essentials portfolios. The portfolio changes are being implemented through a phased transition, with the portfolios expected to reach at least 51% direct ETF exposure by March 31st, 2027. This gives the investment team flexibility to manage market conditions and potential tax impacts rather than making all the changes at once. But rather than focusing on the mechanics, we want to spend our time on why the portfolios are evolving and what the investment team can do differently now, and most importantly, how clients can benefit. I'd like to welcome back to the podcast, Craig Maddock and Wes Blight from our multi-asset management team. Craig, let's start there. Essentials was already a diversified, professionally managed portfolio solution. So why is this the right time to evolve how the portfolio is built?
00:01:14
CM The great news for clients is that everything they value about Essentials stays the same. Clients continue to own one diversified, professionally managed, all-in-one mutual fund portfolio. Our team still sets the asset mix, selects the underlying investments, monitors risk, and balances the portfolios, and adjusts them as markets evolve. The investment objectives and risk profiles are made exactly as the clients know them. What's exciting is how much the toolkit underneath the portfolio has grown. The ETF market has expanded significantly with a wide range of both index tracking and actively managed strategies. That gives us more choice than ever in how we build each part of the portfolio. So now, instead of asking which fund is available, we get to start with a better question. What job does this part of the portfolio need to do and which investment is best suited to do it? That's the philosophy driving these enhancements. Portfolio rule first, vehicle second, and that's a real win for investors.
00:02:16
GS I like that, Craig. Wes, I'm going to turn it over to you. People sometimes hear more ETFs and assume that means more passive investing. How should clients think about the balance between active and passive management?
00:02:28
WB Great question, Greg. We look at the role each investment needs to play, and we don't really see this as a choice between active and passive. If we want broad exposure to a large liquid market, an index tracking ETF can provide an efficient foundation. In other areas, we believe active decisions can add value through things like security selection, credit research, small cap investing, emerging markets, or managing interest rate risk. Hence, structure lets us use broad market exposure as the portfolio's anchor and then allows us to be more intentional about where we're taking active risk. The objective is not less active management. It's more focused active management. We are still actively managing the entire portfolio. So that means setting the asset mix, choosing the underlying strategies, sizing each exposure, monitoring risk, and then adjusting as conditions change.
00:03:24
GS Makes total sense. So, let's make that more tangible. One of the most significant changes is within fixed income. What does the enhanced approach allow you to do differently?
00:03:34
WB This is a great example, as you point out, about why this broader toolkit matters. A fixed income sleeve has several jobs to do. We need to decide How much interest rate sensitivity we want? Where do we want to be on the yield curve? How much corporate credit do we want? Which credit qualities are attractive and where investors are being compensated for taking that additional risk? And historically, we access those opportunities through several broad active mutual fund mint. And because these mandates covered many of the same parts of the bond market, their positioning could actually overlap. And that made it harder to isolate each exposure and to see exactly which part of the portfolio was driving the risk and return. The enhanced portfolios use a more specialized set of actively managed fixed income ETFs managed by Dynamic. And each ETF is designed to perform a clearer job within that specific fixed income sleeve. One can have broad outcomes active bond exposure, another can focus on tactical interest rate and yield curve decisions, while others can target Canadian bonds, corporate credit, or even crossover credit between investment grade and non-investment grade exposures. And that gives us more precision around the building blocks we're using. We can size each exposure according to the role it needs to play and adjust a specific part of the portfolio without having to reshape a broad mandate. Important point is that active oversight remains intact.
Dynamics fixed income teams continue to provide research, security selection, and risk management. And what improves is the clarity and precision of the implementation.
00:05:13
GS Who knew fixed income could be so cool, eh Wes?
00:05:14
WB Exactly, Greg.
00:05:15
GS So the simple way to think about it is this. The same active investment capabilities delivered through clearer and more specialized building blocks.
00:05:26
WB I think that's, you've got it spot on, Greg.
00:05:27
GS Okay, Craig. There's another useful example in Canadian equities. How does changing the dividend exposure create more flexibility in that part of the portfolio?
00:05:37
CM This is a great example of how we're strengthening the portfolio as a whole. When people talk about income-oriented equities, they're often thinking about their defensive qualities, not just the income they pay. Those qualities remain an important part of our toolkit. So, our opportunity is to build on those strengths with a broader mix of investments. We want that resilience to come from how the portfolio works together rather than relying too heavily on any one style or factor. With this new enhanced structure, it's going to give us more flexibility to do just that. Those qualities remain an important part of our toolkit. So, our opportunity is to build on those strengths with a broader mix of investments. We want that resilience to come from how the portfolio works together rather than relying too heavily on any one style or factor. With this new enhanced structure, it's going to give us more flexibility to do just that. Those qualities remain an important part of our toolkit. So, our opportunity is to build on those strengths with a broader mix of investments. We want that resilience to come from how the portfolio works together rather than relying too heavily on any one style or factor. With this new enhanced structure, it's going to give us more flexibility to do just that. We can now combine broad Canadian market exposure with targeted dividend and quality investments, but alongside active growth, fundamental small cap strategies, and each one of those brings something slightly different to the overall mix. So, income and defensive characteristics still matter. What's stronger now is the balance around them. A broader range of investments contributing to returns and helping us manage risk across, quite frankly, different market environments. For clients, the goal is a more robust, resilient portfolio. And ideally, that leads to a smoother ride over time. That doesn't mean eliminating the market ups and downs, but it means building a portfolio that's less dependent on any single style or factor to navigate.
00:06:51
GS So when I think with clients, we'll never need to think about duration or crossover credit or which investment vehicle is used underneath the portfolio. So let's bring it back to the client. What should an essentials investor take away?
00:07:03
CM The big takeaway is that every one of these enhancements is aimed at better outcomes for clients. A broader toolkit gives us more ways to pursue return and manage risk as markets change. And clients don't have to make those decisions themselves. That's what the multi-asset management team is here to do for them.
00:07:21
WB You know, I will add that it's, allowing greater intentionality. We are separating the market exposure we simply want to own from the areas where we want an active manager to be different. And that can help reduce some of the unintended tracking error and really focus that active return potential where we believe it can be the most meaningful and most impactful to our portfolio outcome. The client experience remains simple. One portfolio, professionally managed, monitored and rebalanced over time. allowing greater intentionality. We are separating the market exposure we simply want to own from the areas where we want an active manager to be different. And that can help reduce some of the unintended tracking error and really focus that active return potential where we believe it can be the most meaningful and most impactful to our portfolio outcome. The client experience remains simple. One portfolio, professionally managed, monitored and rebalanced over time.
00:07:49
GS Well, I think that's a great place to leave it. The Scotia Essentials ETF portfolios retain the familiar benefits of a diversified, professionally managed, all-in-one solution. But the team now has a broader and more precise toolkit underneath it. That means more efficient market access, more intentional active management,
00:08:27
VO This audio has been prepared by Scotia Global Asset Management and is provided for information purposes only. Views expressed regarding a particular investment economy, industry or market sector should not be considered an indication of trading intent of any of the mutual funds managed by Scotia Global Asset Management. These views are not to be relied upon as investment advice, nor should they be considered a recommendation to buy or sell. These views are subject to change at any time based upon markets and other conditions, and we disclaim any responsibility to update such views.
To the extent this audio contains information or data obtained from third party sources. It is believed to be accurate and reliable as of the date of publication, but Scotia Global Asset Management does not guarantee its accuracy or reliability. Nothing in this audio is or should be relied upon as a promise or representation as to the future. Commissions trailing commissions, management fees and expenses or may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns, including changes in unit values and reinvestment of all distributions, does not take into account sales, redemption or option changes or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated. Scotia Global Asset Management is a business name used by 1832 Asset Management L.P., a limited partnership, the general partner of which is wholly owned by Scotiabank. Registered trademarks of the Bank of Nova Scotia. Used under license. Copyright. The Bank of
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