Canadian ETFs top $100 billion as investors seek to cut volatility
• Global market uncertainty and volatility are creating growth opportunities for Canada’s ETF industry, according to the latest report on exchange- traded f unds f rom BMO Global Asset Management.
Assets under management ( AUM) in Canadian ETFs have surpassed $ 100 billion, doubling in the past four years, according to the semi- annual report. BMO says the asset class is on pace for a “historic” year, with more than $10.6 billion in inflows so far in 2016.
“Global events, such as the Brexit vote, have kept volatility at the forefront of investors’ concerns,” said Mark Raes, head of product at BMO Global Asset Management Canada. “ETFs have proven their value as efficient and effective positioning tools that can help investors manage through market events.”
He said BMO expects the value traded on ETFs in Canada to double during the next few years.
Canada’s ETF industry remains small compared to other global markets, with the United States gathering AUM of US$ 2.3 trillion. European markets have US$ 529 billion i n AUM, while the Asia- Pacific market has US$123 billion.
BMO’s report says the trends of the past six month suggest investors are turning to Canadian ETFs that help them manage volatility associated with global market events. There is movement into “smart beta” ETFs that focus on income, quality, and low volatility, for example, and investors are migrating away from direct- security holdings to sector- based ETFs that offer more diversified exposure.
In ot her tr e nds, t he search for yield is expected to result in fixed- income ETF growth outpacing the growth of equity ETFs, according to the report. The industry has responded by adding more precise exposures, slicing the credit spec- trum, and segmenting fixed income instruments by maturity.
“In the current low- interest-rate environment, investors are looking beyond traditional exposures and are gravitating toward ETFs that can generate more income for their portfolios,” the report says.