BMO Global Asset Management, the Canadian exchange-traded fund provider, has issued a report outlining the trends in the Canadian ETF market and expectations for the future of the industry.
BMO’s ETF business has grown to over $22bn in assets under management.
The Canadian ETF industry now stands at $84bn in assets under management, a 10% increase over 2014. This growth was driven roughly equally by equity and fixed income funds with $4.5bn and $4.7bn of net inflows respectively. BMO’s ETF business currently sits at $22.9bn as of 31 July 2015.
“The domestic ETF industry has seen strong momentum in 2015. Its user base has expanded as investors grow more comfortable with these funds,” said Rajiv Silgardo, Co-CEO, BMO Global Asset Management. “ETFs have been able to maintain their popularity and continue to prove to be useful through changing market conditions because of their flexibility and diversification benefits.”
The BMO MSCI EAFE Index ETF (ZEA) gathered the most assets this year, highlighting the popularity of ETFs in providing Canadian investors with international equity exposure. With accommodative monetary policy conditions in Europe and Japan, and relatively attractive valuations, funds offering exposure to Europe and the Far East have seen strong inflows so far this year. The second highest net inflows were into the BMO Mid Federal Bond Index ETF (ZFM).
According to the report, ETF providers have been able to facilitate more precise portfolio construction for the end user by offering more targeted exposures. Since ETFs hold a cross section of an asset class, diversification is maintained and effective portfolios can be constructed around narrower market bands.
BMO expect that ETFs will continue to grow in popularity in various geographies because of their low-cost and lack of fee complexity, this is particularly so in markets that are undergoing structural reforms such as the UK and Australia, as well as in North America where more usage is coming from larger institutional players.
The report concluded that, as global ETF markets mature and approach the status of the US market in terms of size and sophistication, an increasingly diverse investor base will raise the liquidity and trading efficiency of ETFs.