The Canadian ETF industry has $84 billion in assets under management, an increase of more than 10% compared to the end of 2014, finds BMO’s latest Canadian ETF Outlook report.
So far in 2015, says the report, equity ETFs have accounted for $4.5 billion in inflows, while fixed-income ETFs have accounted for $4.7 billion.
Delving deeper, the report notes that the particular type of Canadian ETF that has seen the highest net inflows of 2015 invests in developed countries, outside of Canada and the U.S. Due to current monetary policy easing in Europe, for example, investors are seeking broader exposure to international markets.
“ETFs have been able to maintain their popularity and continue to be useful through changing market conditions,” says Rajiv Silgardo, co-CEO of BMO Global Asset Management.
What’s driving ETF growth?
Given the natural liquidity between ETF buyers and sellers, it can be more efficient to trade an ETF over an underlying asset class, says the report. Plus, the funds have intra-day liquidity on the exchange, where the market bid and ask prices provide full transparency into the trading costs.
There have been questions regarding whether ETFs are driving up the price of the securities within their benchmark, the report adds, but most funds seek to diversify across liquid holdings and allow all investor types to participate.
The report predicts that ETFs will continue to gain in popularity with both retail and institutional investors. And, as a result, global ETF markets will likely approach the status of the U.S. market in terms of size and sophistication.