JovFunds Management plans to launch one of the first actively managed stock exchange-traded funds in Canada, and in doing so, wipe away an open-end equity fund whose performance record has been forgettable.

The company is asking shareholders of its Jov Talisman Fund to approve a switch to the ETF structure, a move that will include the replacement of a portfolio manager that has trailed the fund's index, and the hiring of a new active stock picker.

The move will allow JovFunds to take a page from sister company BetaPro Management, which is already a major presence in the Canadian ETF market.

If approved, the ETF will be the first in what is planned to be a new family of active ETFs from JovFunds, to complement the large index ETF family already offered under the BetaPro ETF brand.

The brand name for the new active ETF family, and other portfolios to launch along with the converted open-end fund, are still being debated within the firm, said a JovFunds spokesperson. "Everyone has a Canadian equity mutual fund; we're trying to do something to separate ourselves from the pack," he said.

The index for the Jov Talisman fund is the TSX 60 Index, representing the 60 largest companies on the Toronto Stock Exchange, and the new subadvisor will be Ron Meisels, president of Phases and Cycles, a Canadian equities research firm.

The Talisman fund has been subadvised by Strategic Analysis Corp., and its president, Ross Healy, who will be let go, if the move is approved by shareholders.

Conversion Benefits 

In terms of converting the fund instead of liquidating and starting up a new ETF from scratch, the JovFunds spokesperson said it will allow shareholders of the underperforming fund the chance to benefit from the new subadvisor and ETF structure, while also providing the ETF with $18 million in seed capital, the asset base of the existing open-end fund.

The fund's A share has been trailing the TSX 60 by a wide margin. In the six-month period ending Sept. 30, the fund was down 16.23%, while the index was down 9.71%. In the last one-year period, the fund was down 20.80%, while the index was down 13.46%.

Worst of all, in the past three-year period, while the TSX 60 was up 4.49%, the fund was down 9.50%.

What's more, for this underperformance, the fund carries a hefty management fee of 1.95%, and a performance fee of 20% for returns above the TSX 60.

Needless to say, shareholders have not been paying that performance fee component in recent history. The fund's $18 million asset base is relatively small for a fund that has existed for close to four years, launching in February 2004.

Shareholders of the fund are expected to vote on Dec. 1, and if the measure is approved, the ETF will launch in December.

The management expense ratio is also to be lowered to 0.70% as a result of the move to the ETF structure, though the performance fee will remain in place.

JovFunds already serves as distributor for sister company BetaPro Management's large lineup of Horizons BetaPro ETFs. The BetaPro family, which is focused on commodities, and inverse and leveraged investing, already offers bull and bear TSX 60 ETFs.

-- This report was submitted by Eric Rosenbaum.