Staff
According to BMO Global Asset Management’s BMO Canadian ETF Outlook Update 2012, the Canadian exchange traded fund (ETF) industry is expected to continue its strong pace of growth through the rest of the year.
Currently, the ETF industry has $50 billion in assets under management (AUM); this is up 15.9% from the start of the year. The report predicts that ongoing growth in 2012 will be driven, in part, by competitive pricing, more choice, new suppliers, new distribution channels and the potential entry of actively managed ETFs into Canada.
Here are the notable findings from the survey:
- bond ETFs have continued to dominate fund flows, growing from $12.9 billion to $17.8 billion in AUM so far in this year;
- the demand in higher-yield non-Canadian bond ETFs (e.g., U.S. high-yield corporate bonds and emerging market debt) has increased;
- investors have preferred dividend-based ETFs over growth-oriented areas; the growth of AUM in dividend-based ETFs year-to-date has already surpassed its entire 2011 growth by 45.2%; and
- here’s been continued innovation from Canadian ETF manufacturers, which is helping investors reduce volatility and/or source yield in the current market environment.
The report also noted that there must be a strong emphasis on client education for the growth to continue.
- More distribution channels More asset managers are offering active and passive solutions. Investors can expect an increased penetration of ETFs in DC pension plans and possibly greater use of ETFs within managed programs.
- Additional entrants in the ETF space The industry as grown from two to seven ETF providers in just a few years. As more entrants come on board over the next several years and existing manufacturers ramp up their product offerings, it will open the door to more solutions, a wider range of investors and more diverse portfolios.
- A growing number of implementation strategies As a result of varying styles, exposure types and niches, ETFs are being used in a number of ways by investors. With increased segmentation and ETFs based on specific areas, even basic uses of ETFs, such as cash equitization, will become more efficient for investors.