Evolve’s Raj Lala on Introducing Canada’s First eGaming ETF and other Innovative Products

After graduating from UofT, Raj Lala packed the Canadian Securities Course book with him on a year-long trip. While travelling, he read the book and his interest in the investment space blossomed. 

“My first job was as a telemarketer for a group of investment advisors to bring people out to financial planning seminars. There was a team of 10 telemarketers and I was bringing in more people to the seminars than everybody else combined. So the advisors that I was working with said, why don’t you come in and help us run part of our advisor practice?”

But at only 24 years of age, Lala still felt like he was too young to be managing people’s life savings, and so he passed the portfolio back to the advisors. He then went on to help with setting up a mutual fund company called Excel. It was at Excel that he got a real taste of the manufacturing side and learned how to build a product.

In need of a change, a few years in, Lala wanted to explore other opportunities. He decided to set up a hedge fund and within a year built up the fund to 45 million dollars. His success with the fund caught the attention of another company called Jovian Capital. They offered to buy the hedge fund and have Lala come on board to create an asset management platform for them. Ultimately, Lala built up the platform to five billion dollars in five years.

Following Jovian, in 2008 Lala took some time off to spend with his wife who at the time was pregnant and expecting twin daughters. Lala intended on starting his own business, but the financial crisis caused him to shelf the idea for a year. Once he found the right partners he created a structured products company called Propel Capital. Again, Lala found great success and built up the company to a billion dollars in four years.

Soon after, one of the largest independent asset management companies in Canada, Fiera Capital came knocking on his door and asked him if he would be interested in selling Propel Capital to them. He accepted the offer and went over to run their retail business.

Yet, another opportunity came down the pipeline. “I really wanted to get into the ETF business because I’m a big believer that the future of the retail market and in the investment world is going to be driven by ETFs,” said Lala. Wisdom Tree, one of the world’s largest ETF providers, approached him and asked him to run the Canadian arm of their business, but after doing this for a few years he finally decided in 2016 that it was time to build his own business and Evolve was born. 

Building the Business

Lala started building his business by identifying two areas in the market that he felt were either underserved or unserved.

The first was based on Lala’s belief that there are certain asset classes that truly do benefit from good active management. He notes that it doesn’t necessarily mean that every asset class does, but certain ones, especially in the fixed income world, a good portfolio manager can make a big positive difference on a risk adjusted return basis. He decided to partner up with a number of external, portfolio managers to run some of those asset classes for Evolve.

Along with their Canadian pref fund and a Canadian core fixed income fund, partnerships with Nuveen and Allianz global investors form the funds for Evolve’s active investment bucket.  

The second market that he felt was underserved or unserved is the themantic ETF space. 

Evolve’s Innovative Products

Lala developed products by looking at the stable and long term trends shaping the world over the next 10-15 years. “Things like cybersecurity and the changes in the automobile industry and so on and so forth. They’re all locked up trends in our marketplace. So, I decided to put together a suite of those types of products,” said Lala.

Evolve ETFs has launched a number of innovative investment products including Canada’s first cybersecurity ETF, the world’s first US-focused cannabis ETF, Canada’s first gender diversity ETF, and Canada’s first future of the automobile industry ETF. 

This past June, Evolve also launched Canada’s first eGaming ETF. A space that is growing rapidly, according to Goldman Sachs Investment Research in 2018, the audience size for eSports was 167 million people and by 2022 that number is expected to grow to 276 million. Tech giants like Amazon, Facebook and Google are all making moves to capitalize on this growing industry. 

Evolve has introduced the eGaming ETF with ticker symbol HERO on the TSX, designed to provide investors with access to equity securities of companies listed domestically and globally, and other issuers, with business activities in the electronic gaming industry. 

With a lot of these products being first to market, the company has garnered a lot of attention. These unique ETF offerings are not duplicative of what advisors and their clients already have in their portfolios, and can be used as a diversification tool. 

The company is over 500 million in assets and has had solid performance in a number of their funds. For 2018, Evolve was rated the fastest growing ETF provider in Canada and a number of their funds have claimed top status in Canada and globally. This includes nationally having the top performing healthcare fund, high-yield fund, cybersecurity fund, and in the past year has had the top performing global marijuana ETF as well.

Millennial Investors

“Over the next 10 to 20 years, we’re going to be seeing, the largest wealth transfer in history, there’s expected to be about $30 trillion that are going to move down to the millennial population from their parents,” said Lala. He believes that if you’re going to build a company for the future, you need to look at these demographic shifts. 

Lala sees this shift as an opportunity and believes the millennial generation of investors is very different than previous generations. Millennials view mutual funds as the investment option their parents use, but not necessarily the vehicle of choice that they want to use. According to Lala when looking at the habits of millennials they tend to be more fee conscious which is why ETFs are an attractive investment option to them, since the fees are typically less than mutual fund fees.

Millennial investors also want their investments to express their views on a particular sector and make a statement. For example millennials are active participants in the cannabis sector these days. They want their investments to reflect their views on environmental issues or social governance. 

For now, Lala isn’t too concerned with introducing new products to market. He’s more focused on getting the market to digest Evolve’s existing products.

Determining which products will be successful in the marketplace is both an art and a science. Lala notes that the science part is taking a look at what is resonating in different parts of the world, what sectors are gathering assets, what sectors are performing, and are they filling that need? 

While, the art is determining if some of those strategies are portable to Canada. The Canadian investing public is typically different than the US, they are a bit more conservative. One of the challenges that you often have is relative to the US, Canada is about one 10th the size, so getting a fund to scale in Canada is more difficult. 

Advice for Entrepreneurs

In regards to advice he has for other entrepreneurs. “The genius isn’t always in the idea. It’s in the execution,” said Lala. 

Being surrounded by a solid team is important, and he points to his team of educators, as a contributing part of his success as an entrepreneur. After being in this business for 20 plus years, most of the people on his team have worked with him in a previous life. As a result, he has built that trust with them over the years to know that they can get projects from point A to point Z. 

It is clear that Lala has silenced a lot of doubters as Evolve continues to introduce innovative products that seem to resonate with investors. “Many said, how are you going to compete with them? And, you know, my view was that if you work really hard and you’re creative and you’re innovative, no matter how crowded a space is, you can find a way to succeed,” said Lala.