The Canadian exchange-traded fund (ETF) industry is expected to continue its strong pace of growth through the rest of the year, according to a report by BMO Global Asset Management.
The world’s first exchange-traded fund (ETF), the Toronto Stock Exchange-listed Toronto Index Participation Fund, debuted in Canada some some 22 years ago.
The Canadian industry currently stands at C$50 billion in assets under management (AUM), up 15.9 percent since the start of the year.
The report, BMO Canadian ETF Outlook Update 2012, predicts that ongoing growth in 2012 will, in part, be driven by competitive pricing, more choice, new suppliers, new distribution channels and the potential entry of actively-managed ETFs into Canada.
“Increased awareness of the benefits of ETFs among Canadians is translating into increased adoption rates,” said Rajiv Silgardo, Co-CEO, BMO Global Asset Management. “The ETF space should continue to grow as long as suppliers continue to focus on innovation and anticipate the needs of investors.”
Silgardo noted that BMO’s own ETF business has grown dramatically since being launched in 2009, with AUM recently surpassing C$7 billion and increasing 16 percent in the last two months alone. [See Growth and income ETFs drive AUM higher at Canada’s BMO Financial Group]
Several notable trends are contributing to the Canadian ETF industry’s impressive growth this year, including: the appeal of bond ETFs, which have dominated inflows; increased demand for high-yield, non-Canadian bond ETFs, such as US high-yield corporate bonds and emerging market debt; and, within equities, a preference for dividend-based strategies.
Continued innovation from ETF providers, which is helping investors reduce volatility and/or source yield in the current low interest-rate environment, has also contributed.
Looking ahead, BMO outlines a number of key drivers that will fuel asset growth in the Canadian ETF industry. These include an increase in the number of distribution channels; additional entrants into the ETF space; a growing number of implementation strategies; and the debut of actively-managed ETFs.
However, the firm highlights the need for strong emphasis on client education for the ETF industry to continue to flourish.
“Although existing ETF users are becoming increasingly sophisticated, it’s critical that newer investors also receive the same level of support to ensure a superb client experience,” said Silgardo. Local expertise and on-the-ground specialists will be essential to ensuring new and existing clients get the education and support they need.”